Q4 2025 Axos Financial Inc Earnings Call
Alicia: Greetings and welcome to the Axos Financial Q4 2025 hearing call on my behalf. At this time, all participants are under a witness testimony. Each participant in this session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce you to your host, Johnny Lai, SVP Corporate Development and IR. Thank you, Johnny. You may begin.
Leading and welcome to the Access Financial fourth quarter, 2025 earnings, call and webcast.
Time all participants are ending with this team.
This question is answered by the formal please.
If anyone wants to require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Johnny Lai: Thanks, Alicia. Good afternoon, everyone, and thanks for your interest in Axos. Joining us today for Axos Financial Inc. Q4 and Q5 Financial Results Conference call are the company's president and chief executive officer, Gregory Garrabrants, and executive vice president and chief financial officer, Derrick Walsh. Greg and Derrick will review and comment on the financial and operational results for the quarter and fiscal year ended June 30, 2025, and we will be available to answer questions after the prepared remarks. Before I begin, I'd like to remind listeners that the prepared remarks made on this call may contain forward-looking statements that are subject to risks and uncertainties, and that management may make additional forward-looking statements in response to your questions. Please refer to the safe harbor statement found in today's earnings press release and in our investor presentation for additional details.
It is now my pleasure to introduce you to your host Johnny lie SVP, corporate development and IR. Thank you Johnny. You may begin
Thanks, Alicia. Good afternoon, everyone, and thank you for your interest in Access.
Joining us today for Axos Financial, Inc.'s fourth quarter and fiscal 2025 financial results conference call are the company's President and Chief Executive Officer, Gregory Garrabrants, and Executive Vice President and Chief Financial Officer, Derrick Walsh.
Greg and Eric will review and comment on the financial operational results for the quarter and fiscal year ended June 30, 2025, and we will be available to answer questions after the prepared remarks.
Before I begin, I'd like to remind listeners that I'm prepared to March made. On this call. May contain 4 legging statements that are subject to risks and uncertainties.
And that management may make additional for leaking statements in response to your questions.
Johnny Lai: This call is being webcast, and there will be an audio replay available in the investor relations section of the company's website located at axosfinancial.com for 30 days. Details for this call were provided on the conference call announcement and in today's earnings press release. Before handing over the call to Greg, I'd like to remind listeners that in addition to the earnings press release, we also issued an earnings supplement, an AK, with additional financial schedules. All of these documents can be found on axosfinancial.com. With that, I'd like to turn the call over to Greg.
Please refer to the safe harbor statement. Found in today's earnings, press release, and in our, in our investor presentation for additional details,
This call is being webcast and there will be an audio replay available in the investor relations section of the company's website, located at axis financial.com for 30 days.
Details for this call were provided on the conference call announcement and in today's earnings press release.
Before handing over the call to Greg. I like to remind listeners that in in addition to the earnings press release. We also issued an earning supplement in AK with additional Financial schedules.
All of these documents can be found on access financial.com.
Gregory Garrabrants: Thank you, Johnny. Good afternoon, everyone, and thank you for joining us. I'd like to welcome everyone to Axos Financial's conference call for the Q4 of Q4 2025, ended June 30, 2025. I thank you for your interest in Axos Financial and Axos Bank. We delivered strong results this quarter, generating $856 million of net loan growth linked quarter, six basis points of net interest margin expansion, and an 18% year-over-year increase in book value per share. We continue to generate high returns, as evidenced by the 17% return on average common equity and the 1.9% return on assets in the three months ended June 30, 2025. Other highlights in the quarter include net interest income was $280 million for the three months ended June 30, 2025, up 7.7% from the $260 million in the prior year period.
With less with that. I'd like to turn the call over to Greg.
Thank you, Johnny. Good afternoon, everyone, and thank you for joining us. I'd like to welcome everyone to Axos Financial's conference call for the fourth quarter of fiscal 2025, ended June 30, 2025.
I thank you for your interest in Access Financial and access bank.
We delivered strong results, this quarter generating 856 million of net, uh, loan growth, linked quarter 6 basis. Points of net interest, margin expansion and an 18% year-over-year increase in book value per share.
continue to generate higher returns as evidenced by the 17% return on average common equity and the 1.9% return on assets in the 3 months, ended June 30 2025
Gregory Garrabrants: Net interest margin was 4.84% for the quarter ended June 30, 2025, up six basis points from the 4.78% in the quarter ended March 31, 2025. One loan from the FDIC purchase pool paid off this quarter, and that accelerated accretion of the purchase price discount increased our net interest income by approximately $450,000. We continue to maintain a best-in-class net interest margin with or without the benefit of the accretion from loans purchased from the FDIC. Total on balance sheet deposits increased 7.6% year-over-year to $21 million. Our diverse and granular deposit base across consumer and commercial banking and our securities businesses continue to support our organic loan growth. We managed our operating expenses well this quarter. Total non-interest expenses for the quarter ended June 30, 2025, were up by 3% from the prior quarter.
Other highlights in the quarter include net. Interest income was 280. Million for the 3 months, ended June 30th 2025 up 7.7% from the 2160 million in the prior year period.
The interest margin was 4.84% for the quarter ended June 30, 2025, up 6 basis points from the 4.78% for the quarter ended March 31, 2025.
1 loan from the fbic, purchase pool. Paid off this quarter and that accelerated accretion of the purchase price discount. Increased, our, net interest income by approximately 450,000.
we continue to maintain a best-in-class net interest margin with or without the benefit of the accretion from loans purchased from
the FDIC.
Total on balance sheet, deposits increased 7.6% year-over-year to 21 million. Our diverse and granular deposit base across consumer and Commercial Banking. In our Securities businesses continue to support our organic loan growth
Gregory Garrabrants: Excluding the reversal of a legal accrual in the prior quarter, which reduced other G&A expenses by approximately $2 million, total non-interest expenses were up $2.5 million from March to June. Total non-accrual loans declined by $15 million linked quarter, resulting in our non-accrual loans to total loans ratio improving by 89 basis points in the quarter ended March 31, 2025, to 79 basis points as of June 30, 2025. Net income was approximately $110.7 million in the quarter ended June 30, 2025, compared to $105.2 million in the quarter ended March 31. Diluted EPS was $1.92 for the quarter ended June 30, 2025, compared to $1.81 in the March quarter. We had a few non-recurring items this quarter that impacted our net income and EPS. We recognized a $12 million pre-tax gain from the sale of multifamily loans that were included in mortgage banking income.
We managed our operating expenses well this quarter. Total non-interest expenses for the quarter ended June 30, 2025, are up by 3% from the prior quarter, excluding the reversal of illegal or plural in the prior quarter, which reduced other G&A expenses by approximately $2 million.
Total interest expenses were up $2.5 million from March to June.
Total non-accrual loans declined by 15 million link code.
resulting in our non-accrual loans, the total
improving by 89 basis points in the quarter ended March 31st 2025 to 79 basis points as of June 30th 2025.
Added March 31st, valid EPS was 1.92 uh was 1.92 for the quarter ended June 30th 2025 compared to A1 81 and the March quarter.
Gregory Garrabrants: We also recognized a one-time non-cash deferred tax impairment that increased our net income tax by $5.5 million. Excluding the impact from those two non-reoccurring items, our adjusted net income and adjusted earnings per diluted share would have been $107.7 million and $1.87 per share, respectively. We took advantage of the temporary market downturn in April through a purchase of approximately $31 million of common stock at an average price of $59 per share. Total originations for investment, excluding single-family warehouse lending, increased 5% on a linked quarter basis, resulting in net loan growth in loans for investment of approximately $856 million for the three months ended June 30, 2025, representing an increase of 4.2% linked quarter or 16% annualized. Asset-based lending, commercial real estate, specialty lending, equipment leasing, lender finance, and single-family warehouse had strong originations and net loan growth this quarter.
We had a few non-recurring items, this quarter that impacted our net income and EPS, we recognized a 12 million pre-tax gain from the sale of multifamily loans that were included in Mortgage Banking income. We also recognized a 1-time non-cash deferred tax. Impairment that increased, our net income tax by 5.5 million, excluding the impact from those 2 non-recurring. Items are just the net income and adjusted earnings per diluted share, would have been 107 point a 7 million and a $1.87 for share respectively.
We took advantage of the temporary Market, downturn in April, to repurchase approximately 31 million of common stock at an average price of $99 per share.
Total originations for investment excluding single family, Warehouse lending increased 5% on a link quarter basis. Resulting in net loan growth. Uh, in loans for investment of approximately 856 million, for the 3 months, end of June 30th, 2025 representing an increase of 4.2% Link quarter or 16% annualized,
Gregory Garrabrants: Additionally, we grew ending loan balances in single-family mortgage for the second consecutive quarter. Average loan yields for the three months ended June 30, 2025, were 8% flat compared to the prior quarter. Average loan yields for not purchased loans were 7.66%, and average yields for purchased loans were 14.9%, which includes the accretion of our purchase price discount. The FDIC purchased loans continue to perform, and all loans in the portfolio remain current. New loan interest rates were the following: single-family mortgage 7.2%, multifamily 7.1%, CNI 7.8%, and auto 8.3%. Ending deposit balances were $20.8 billion, and they were up 3.4% linked quarter and up 7.6% year-over-year. Demand money market and savings accounts representing 95% of total deposits at June 30, 2025, increased by 7% year-over-year.
Asset based lending. Commercial real estate specialty, lending equipment, leasing lender, finance and single family Warehouse had strong originations in net loan growth. This quarter. Additionally, we grew ending loan, balances in single family mortgage for the second consecutive quarter.
Average loan yields for the 3 months, ended June 30th, 2025 were 8%. Flat compared to the prior quarter average loan yields for non purchase, loans were 7.66% and average yields for purchase. Loans were 14.9%, which includes the creation of our purchase price discount.
The FDIC purchase loans, continue to perform and all loans in the portfolio. Remain current.
New loan, interest rates were the following single family, mortgage 7.2% multi family 7.1 cni 7.8 and auto 8.3.
Gregory Garrabrants: We have a diverse mix of funding across a variety of business verticals, with consumer and small business representing 59% of total deposits, commercial cash, treasury management, and institutional representing 20%, commercial specialty representing 11%, Axos Fiduciary Services representing 5%, and Axos Securities, which is our custody and clearing business, representing 5%. Total non-interest bearing deposits were approximately $3 billion at the end of the quarter, up slightly from the prior quarter. Client cash sorting deposits ended the quarter around $980 million, up from $900 million at March 31, 2025. We remain focused on adding new assets from existing and new advisors to grow our assets under custody and cash balances. In addition, our Axos Securities deposits on our balance sheet, we had approximately $450 million of deposits off balance sheet at partner banks.
Ending deposit balances where 20.8 billion and they were up 3.4% link quarter and up to 7.6% year-over-year. Demand money market and savings accounts representing 95% of total deposits at June 30th 2025 increased by 7% year-over-year.
We have a diverse mix of funding across a variety of business, verticals with consumer and small business representing. 59% of total deposits commercial cash, Jersey management and institutional representing 20% commercial specialty. Representing 11 excess fiduciary Services, representing 5 and axo security which is our custody and clearing business representing 5%.
Total non-interest-bearing deposits were approximately $3 billion at the end of the quarter, up slightly from the prior quarter.
client cast, sorting deposits, end of the quarter, around 980 million up from 900 million at March, 31st 2025
We remain focused on adding new assets from existing and new advisors to grow our assets under custody and cash balances.
Gregory Garrabrants: Our consolidated net interest margin was 4.84% for the quarter ended June 30, 2025, compared to 4.78% in the quarter ended March 31, 2025. We are seeing strong growth in accounts and balances from our Axos One consumer bundle deposit product, which includes a checking and a savings account. Growth in Axos One and other deposit businesses, including our commercial, cash, and treasury management specialty businesses, has provided us with sufficient funding to support our strong organic loan growth. We are also making excellent progress cross-selling deposits across our lending businesses. We expect our consolidated net interest margin ex-FDIC loan purchase accretion to stay at the high or slightly above the 4.25% to 4.35% range we have targeted over the past year.
In addition, our access Securities deposits on our balance sheet. We had approximately 450 million of deposits. Off balance sheet at partner Banks.
Our Consolidated, net interest margin was 4.84% for the quarter end of June 30th, 2025 compared to 4.78% of the quarter ended. March 31st 2025, we are seeing strong growth in accounts and balances from our access 1 consumer bundle deposit product which includes a checking and a savings account.
Growth and access 1 and other deposit businesses including our commercial cash and treasury management. And Specialties businesses has provided us with sufficient funding to support our strong organic loan growth,
We are also making excellent progress, cross-selling, deposits across our lending businesses.
Gregory Garrabrants: While new loan yields are coming in slightly lower in many lending categories we compete in, we continue to offset some of that pressure through refinancing or paying off lower yielding single-family and multifamily loans originated two to three years ago. Our loan pipelines have improved over the past few quarters as a result of successfully expanding our distribution channels across certain commercial lending categories and contributions from teams we have onboarded over the past 12 months. We also believe we have moved past our peak level of prepayments in our commercial specialty real estate portfolio, which had been a significant headwind to net loan growth for the past several quarters. Taking all of these factors into consideration, we expect organic loan growth to come in toward the mid to high end of our single-digit and low-teens range on an annual basis in fiscal 2026.
We expect our Consolidated, net interest, margins X, FDIC loan, purchase secretion to stay at the high or slightly above the 4.25% range. We have targeted over the past year. While new loan yields are coming in slightly lower. In many lending categories, we compete in. We continue to offset some of that pressure through refinancing or paying off lower yielding, single family and multi family loans, originated 2 to 3 years ago
Our loan pipelines have improved over the past few quarters as a result of successfully expanding our distribution channels across certain commercial lending categories and contributions from teams we have onboarded over the past 12 months.
Gregory Garrabrants: The credit quality of our loan book continues to be solid, and our historic and current net charge-offs remain low. Total non-performing assets declined by $13.4 million linked quarter, representing 71 basis points of total assets compared to 79 basis points in the quarter ended March 31, 2025. The sequential decrease in non-accrual loans was primarily driven by $9.4 million in our CNI portfolio and $4.9 million in our commercial real estate lending business. We do not anticipate a material loss from loans currently classified as non-performing in our single-family, multifamily, or commercial real estate loan portfolio. Our commercial real estate specialty portfolio continues to perform very well and in line with expectations. Non-accrual CNI loan balances at June 30, 2025, were down by approximately $9.4 million from the prior quarter.
We also believe we have moved past our peak level of prepayments in our commercial specialty real estate portfolio which had been a significant headwind to net loan growth for the past. Several quarters, taking all of these factors into consideration, we expect organic loan growth to come in toward the mid to high end of our single digit and low teens range on an annual basis in fiscal 2026.
the credit quality of our loan book continues to
Total not performing assets declined by 13.4 million, link quarter representing 71 basis points. A total assets compared to 79 basis points in the quarter ended March 31st 2025
The sequential decrease in non-accrual loans were primarily driven by 9.4 million in our cni portfolio and 4.9 million in our commercial real estate lending business.
We did not anticipate a material loss from loans currently classified as non-performing in our single-family, multi-family, or commercial real estate loan portfolio.
Our commercial real estate specialist portfolio continues to perform very well. And in line with expectations
Gregory Garrabrants: The two larger CNI loans we have on non-accrual will continue to be up to date on their payments, and no new CNI loans will place on non-accrual in the quarter. We continue to monitor the credit trends across all loan portfolios and have not seen any broad-based deterioration in any individual lending category. Axos Clearing, which includes our correspondent clearing and RIA custody business, had a good quarter. Total assets under custody increased from $37.1 billion at March 31, 2025, to $39.4 billion at June 30, 2025. Net new assets for our custody business increased by $215 million in the June quarter, extending the positive net new asset momentum we have experienced over the past several quarters. The stock market has rebounded off its year-to-date lows, and many of our custody clients continue to generate positive assets under management growth.
Non acrylic. Can I loan balance? Is it June 30th 2025? We're down by approximately 9.4 million from the prior quarter.
2 largest cni loans. We have on non acrylic will continue to be up to date on their payments and no new cni loans or fillets on non-accrual in the quarter.
We continue to monitor the credit Trends across all loan portfolios and have not seen any broad-based deterioration in any individual lending category.
Access clearing which includes our correspondent clearing and ra custody business had a good quarter.
Total assets under custody increased from 37.1 billion in March, 31st 2025 to 39.4 billion at June 30th 2025.
Gregory Garrabrants: The pipeline for new custody clients remains healthy for small and large RIA firms, underpinning our optimism and continued net positive net new asset growth in our securities business. Total deposits at Axos Clearing were $1.4 billion at the end of the quarter, up $90 million from where they were in the prior quarter. Of the $1.4 billion of deposits from Axos Clearing, approximately $990 million were on the balance sheet, and $450 million were held at partner banks. The slight sequential increase in deposits is encouraging, given a strong rally in the stock market. While it's difficult to be absolutely certain that cash sorting has bottomed, we believe that clients and advisors are becoming less focused on maximizing yield in their sweep accounts compared to a year ago.
Total deposits at <unk> were $1 4 billion at the end of the quarter up $90 million from where they were in the prior quarter of $1 4 billion of deposits from access clearing approximately $990 million were on the balance sheet and 450 million were held up partner banks the slight sequential increase in deposits was encouraging given the strong rally.
Now new assets for our custody business increased by 215 million in the June quarter, extending the positive, net new asset momentum. We have experienced over the past several quarters. The stock market has rebounded off its year-to-date lows and many of our custody clients continue to generate positive assets under management growth. The pipeline for new custody, clients remains healthy for small and large. Ra firms. Underpinning. Our optimism and continued net, positive, net new asset growth in our Securities business.
Total deposits that Access Clearing were $1.4 billion at the end of the quarter, a $90 million increase from where they were in the prior quarter. Of the $1.4 billion in deposits from Access Clearing, approximately $990 million were on the balance sheet, and $450 million were held at partner banks.
On the stock market, while it's difficult to be absolutely certain that cash sorting has bottomed, we believe that clients and advisers to becoming less focus on maximizing yield in our sweep accounts compared to a year ago.
Gregory Garrabrants: Many of our commercial lending and deposit teams, including our life science and technology business and our middle market banking teams that we have added over the prior few quarters, are now producing nicely and contributing to loan and commercial deposit growth. We onboarded a new floor plan lending team that will help us scale our floor plan lending business. We continue to evaluate M&A opportunities to augment growth from our existing businesses and team liftouts. The pace and quality of M&A opportunities have increased over the past few months, and seller expectations have become more reasonable. We are evaluating specialty lending and non-banking businesses that generate asset and transaction-based income and low-cost deposits. Our strong capital, liquidity, and profitability allow us to be disciplined in how and where we deploy capital to ensure the investments meet our strategic and valuation hurdles. We ended fiscal 2025 with positive momentum.
Many of our commercial lending and deposit teams, including our life science and <unk>.
Technology business and our middle market banking teams that we have added over the prior few quarters and now producing nicely and contributing to loan and commercial deposit growth. We on boarded a new floor plan lending team that will help us scale, our floorplan lending business.
We continue to evaluate M&A opportunities to augment growth from our existing businesses and team lift outs, the pace and quality of M&A opportunities have increased over the past few months and seller expectations have become more reasonable we are evaluating specialty lending and non banking businesses that generate asset and transaction based income and low cost deposits.
Our strong capital liquidity and profitability allow us to be disciplined in how and where we deploy capital to ensure the investments meet our strategic and valuation hurdles. We ended fiscal 2025 of positive momentum loan growth accelerated in the back half of the year, our credit quality was strong and our net interest margin remained above our long term target.
Gregory Garrabrants: Loan growth accelerated in the back half of the year, credit quality was strong, and our net interest margin remained above our long-term target. We expect a change in the income tax calculation methodology for the state of California that will reduce our income tax rate by three percentage points, starting in the September 30, 2025 quarter, boosting our net income and EPS in fiscal 2026 and beyond. With this being the 25th anniversary of Axos Bank, we are proud of delivering consistent performance through a variety of economic, geopolitical, and regulatory environments. I'm even more excited about the opportunities that we have in each of our businesses. We remain hyper-focused on executing our strategic and operational initiatives. These include investments in technology and operations to scale businesses and roll out new products faster while maintaining a best-in-class operating efficiency ratio.
We expect the change in income tax calculation methodologies for the state of California will reduce our income tax rate by three percentage points starting in the September 32025 quarter boosting our net income and EPS in fiscal 2026 and beyond.
With this being the 20 <unk> anniversary of access bank, we are proud of delivering consistent performance through a variety of economic geopolitical and regulatory environment.
I'm, even more excited about the opportunities that we have in each of our businesses. We remain hyper focused on executing our strategic and operational initiatives. These include investments in technology and operations to scale businesses and rollout new products faster, while maintaining a best in class operating efficiency ratio. We believe we will see benefits in our operating efficiency from.
Gregory Garrabrants: We believe we will see benefits in our operating efficiency from the implementation of artificial intelligence across the organization and believe that its implementation will enable us to create greater operating leverage and improve the speed, quality, and cost of software development projects and accelerate new product delivery. We believe that we can deploy our capital in a disciplined manner in our existing and new businesses to further diversify our lending, funding, and fee-based income. We have a lot of runway in each of our businesses, and I feel confident that our teams and our leaders will deliver the results that our shareholders have come to expect from us. Now I'll turn the call over to Derrick, who will provide additional details on our financial results.
The implementation of artificial intelligence across the organization and believes that its implementation will enable us to create greater operating leverage and improve the speed quality and cost of software development projects and accelerate new product delivery.
We believe that we can deploy our capital in a disciplined manner and they are existing and new businesses to further diversify our lending funding and fee based income we have a lot of runway in each of our businesses I feel confident that our teams and our leaders will deliver the results that our shareholders have come to expect from US now I'll turn the call.
Over to Derek who will provide additional details on our financial results.
Derrick Walsh: Thanks, Greg. Quick reminder that in addition to our press release, an AK with supplemental schedules was filed with the SEC today and are available online through Edgar or through our website at axosfinancial.com. I will provide some brief comments on a few topics. Please refer to our press release and our SEC filing for additional details. Non-interest expenses were approximately $151 million for the three months ended June 30, 2025, up by $4.4 million from the three months ended March 31, 2025. Excluding approximately $1.9 million reversal of a legal accrual in the March 31 quarter, total non-interest expenses were up by approximately $2.5 million in the linked quarter. Salaries and benefit expenses were $74.9 million, roughly flat from the prior quarter ended March 31. Professional services expenses were $10.4 million compared to $8.2 million in fiscal Q3 2025.
Thanks, Greg quicker.
A quick reminder, that in addition to our press release and 8-K with supplemental schedules was filed with the SEC today and are available online through Edgar or through our website at access financial dotcom.
I will provide some brief comments on a few topics.
Please refer to our press release, and our SEC filings for additional details.
Noninterest expenses were approximately $151 million for the three months ended June 32025.
By $4 $4 million from the three months ended March 31 2025.
Excluding approximately $1 $9 million reversal of a legal accrual in the March 31st quarter total noninterest expenses were up by approximately $2 $5 million in the linked quarter.
Salaries and benefit expenses were $74 9 million roughly flat from the prior quarter ended March 31.
Professional services expenses were $10 4 million compared to $8 2 million in fiscal Q3 2025.
Derrick Walsh: The sequential increase in professional services expense was attributed to a handful of services across different business units. Looking ahead to the September quarter, we recently added a floor plan financing team that adds an incremental $1 million of expense per quarter. And as a reminder, September is when we have our annual merit compensation increase, which we estimate to be about 4%. We remain focused on managing our expenses while making strategic investments in a controlled manner in order to maintain our operating efficiency ratio. Next, our income tax rate was 29% for the three months ended June 30, 2025, compared to 27.4% in the corresponding year-ago period. Our income tax expense in Q4 25 included a one-time non-cash deferred tax impairment related to the change in the taxation of financial institutions that I mentioned on last quarter's call.
The sequential increase in professional services expense was attributed to a handful of services across different business units looking ahead to the September quarter. We recently added a floor plan financing team that as an incremental $1 million of expense per quarter and as a reminder September is when we have our.
Our annual Merit compensation increase, which we estimate to be about 4%.
We remain focused on managing our expenses, while making strategic investments in a controlled manner in order to maintain our operating efficiency ratio.
Next our income tax rate was 29% for three months ended June 32025, compared to 27, 4% in the corresponding year ago period.
Our income tax expense in Q4 dollars 25 included a onetime noncash deferred tax impairment related to the change in the taxation of financial institutions that I mentioned on last quarter's call.
Derrick Walsh: The California budget proposal went into effect on June 30, 2025, which required us to reassess the value of our deferred tax assets. That resulted in a $5.6 million one-time non-cash impairment charge in the quarter ended June 30, 2025. Our income tax expense for the quarter ended June 30, 2025 benefited from the increase in our stock price from June 30, 2024 to June 30, 2025, which is one factor used to calculate our CEO's stock-based incentive compensation. The net impact of the deferred tax asset remeasurement and stock-based incentive compensation calculation combined with higher pre-tax income was a $2.3 million increase in our income tax expense in Q4 2025. Starting in the quarter ending September 30, 2025 and going forward, we expect our corporate tax rate to be approximately 26% to 27%, an improvement of three percentage points from the previously 29% to 30%.
The California budget proposal went into effect on June 32025, which required us to reassess the value of our deferred tax assets.
That resulted in a $5 6 million onetime noncash impairment charge in the quarter ended June 32025.
Our income tax expense for the quarter ended June 32025 benefited from the increase in our stock price from June 30 to 24 to June $30 25, which is one factor used to calculate our CEO stock based incentive compensation and the net impact of the deferred tax asset re measurement.
And stock based incentive compensation calculation combined with higher pre tax income was a $2 $3 million increase in our income tax expense in Q4 2025.
Starting in the quarter ending September 32025, and going forward, we expect our corporate tax rate to be approximately 26% to 27% an improvement of three percentage points from the previous slide 29% to 30%.
Derrick Walsh: I'll wrap up with our loan pipeline and growth outlook. Our loan pipeline remains healthy at approximately $2 billion as of July 25, 2025, consisting of $532 million of single-family residential jumbo mortgage, $49 million of gain on sale mortgage, $302 million of multifamily and small business commercial, $73 million of auto and consumer, and $1.1 billion in commercial lending. We are not seeing any material impacts from imposed or proposed tariffs on loan demand so far, and we believe that we will be able to grow loan balances organically at the midpoint to high end of our high single digits to low teens year-over-year growth target over the next 12 months, excluding the impact of the loan portfolio purchased from the FDIC or any other potential loan or asset acquisitions. With that, I'll turn the call back over to Johnny.
I'll wrap up with our loan pipeline and growth outlook are.
Loan pipeline remains healthy at approximately $2 billion as of July 25, 2025, consisting of $532 million of single family residential jumbo mortgage for.
$49 million of gain on sale mortgage.
$302 million of multifamily and small business commercial.
$73 million of auto and consumer and.
And $1 $1 billion in commercial lending.
We are not seeing any material impacts from imposed or proposed tariffs on loan demand. So far and we believe that we will be able to grow loans balances organically at the midpoint to high end of our high single digits to low teens year over year growth target over the next 12 months, excluding the impact of the loan portfolio purchase.
Just from the FDIC or any other potential loan or asset acquisitions.
With that I'll turn the call back over to Jonathan.
Johnny Lai: Thank you, Derrick. Alicia, we're ready to take questions.
Thank you Darren.
Alicia we are ready to take questions.
Speaker 8: Hey. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we pull the questions. Thank you. Our first question comes from the line of Kyle Peterson with Needham & Pucketty. Please proceed.
We will now begin.
Anthony.
Good question.
One on your telephone.
Thompson.
Your line is no question.
Okay.
Your question.
Well thank you.
Okay.
Okay.
Sorry.
One moment.
Yeah.
Okay great.
Awesome.
Peterson with Needham.
Kyle Peterson: Great. Good afternoon. Thanks, guys. I want to start off on loan yields and that kind of side of the net interest margin. It sounds like maybe there might be a little more pricing pressure and yields on new loans might be lower, but then it could be a partial offset on prepaid being a little slower. I guess, how do you guys view the net impact of those? And I guess, is the NIM outlook, it sounds fairly consistent with last quarter? Are those kind of a rough wash, or how are you guys looking at the different pieces there?
Great. Good afternoon, thanks, guys.
Let's start off on loan yields and that kind of side of the net interest margin it sounds like.
Maybe there might be a little more pricing pressure.
And yields on new loans might be lower but then it could be.
Partial offset on.
Prepays being a little slower I guess like how do you guys view like the net impact of those in and I guess like us.
The NIM outlook it sounds fairly consistent with last quarter or are those kind of a rough wash or how are you guys looking at different pieces there.
Gregory Garrabrants: I think they're fairly consistent. For a lot of these businesses, like the cap call side and whatnot, they have a lot of deposits that come with them, and the middle market business also has that too. So while loan yields might be a little tighter, there's an offsetting benefit on the funding side, which results in a decent net. I think there, if I were to take a guess, I'd say that I think that the credits of red side has been more consistent this quarter with the last quarter. So I wouldn't say there's that much incremental pressure, but it's just it is very different than it was a year ago, just with respect to particularly in some of the CNI club deals and some of the syndicated deals. There's just a lot of banks that are kind of pushing into that space.
I think they're fairly consistent.
For a lot of these businesses like the cap call side and whatnot. They have a lot of deposits that come with them in the middle market business also has that too so while loan yields might be a little tighter there is.
An offsetting benefit on the funding side, which results in a decent man.
I think there.
We're not taking gas I would say that.
I think that the credit spread side is more.
<unk> been more consistent this quarter with with our last quarter. So I wouldn't say there is that much incremental pressure, but it's just it is very different than it was a year ago, just with respect to.
Particularly in some of the C&I club deals and some of the syndicated deals Theres just a lot of banks that are kind of pushing into that space. I think has made on maybe you want to grow as much in commercial real estate in and Thats pushed it down a bit I think.
Gregory Garrabrants: I think if they don't maybe want to grow as much in commercial real estate, and that's pushed it down a bit. I think this is somewhat of obviously a forecast, but I think we're going to be able to keep it pretty consistent, I think. But it'd be a basis point or two either way, sure. It's not that much of a science.
This is somewhat of obviously a forecast, but I think that's where we're going to be able to keep it pretty consistent I think but it would be it could it be a basis point or two either way sure.
It's not that much of a science.
Kyle Peterson: Okay. That's helpful. And then, Greg, I know we've kind of chatted in the past, and you've mentioned kind of different dynamics and kind of how you're kind of leveraging AI to longer-term kind of press on margins and cap expense growth. I guess, could you remind us how you are thinking about expense growth relative to revenue, how you guys are using, whether it's tech and AI in your day-to-day? I think it'd be really helpful for everyone on the call.
Okay.
That's helpful and then.
Greg I know we've.
Chatted in the past and you've mentioned kind of a different dynamic.
Dynamics and kind of how you're kind of leveraging AI to longer term kind of press on on margins and cash makes sense Greg.
I guess that you remind us like how you are thinking about.
Expense growth relative to revenue how you guys are using.
It's tech in AI and in your day to day, I think it'd be really helpful for everyone on the call.
Gregory Garrabrants: Right. What we had previously set as a target that we wanted to ensure that our personnel and professional services cost growth did not exceed 30% of our net interest income and non-interest income growth. Now, we are adding, we just added a team there. So that's definitely a target over the year. We added a fairly expensive floor plan team. They're great folks. We expect them to be able to produce, but it'll take a couple of quarters to really get that running. But just in general, with respect to artificial intelligence, there's just so much opportunity, and we are taking advantage of that opportunity now. And it's just making people more efficient, and it's taking a lot of routine tasks and automating them.
Right.
We had previously set as a target that we wanted to ensure that our personnel and professional services cost growth did not exceed 30% of our net interest income and noninterest income growth now.
We are adding we just added a team there.
So that's definitely a target over the year, we added a fairly expensive floor plan team. They are great folks, we expect them to be able to produce but it'll take a couple of quarters to really get that running.
But just in general with respect to artificial intelligence.
Just so much opportunity and we are taking advantage of that opportunity now and it's making it's just making people more efficient and it's taking a lot of routine tasks and automating them.
Gregory Garrabrants: And so the ability to take unstructured data out of documents, for example, we obviously, we have, let's say you get a, you have a big legal agreement for a commercial loan. And previously, it would take an attorney quite a bit of time to go through and make sure all the covenants were extracted and placed into the commercial origination system. Now, AI can read that. It can present it to the attorney, make sure that it's correct. When the attorney makes corrections, it will auto learn off that and then allow that process to be just a lot faster. It doesn't mean that we're relying entirely on that agent, but it makes that process a lot faster. That agent can then auto-upload those covenants into the system for tracking. So, I mean, there's lots of examples like that that are going on.
And so the ability to take.
Unstructured data out of.
Documents.
For example, we obviously you know we have let's say you get you have a big Bill.
Legal agreement foray.
For our commercial loan and previously we had taken attorney quite a bit of time to go through and make sure. All the covenants were extracted and placed into the commercial origination system.
Now AI can read that it can present it to the attorney make sure that its correct. When the attorney makes corrections it will auto learn off that and then.
Allow that process to be just a lot faster.
Doesn't mean that we're relying entirely on.
That agent, but it makes that process a lot faster that agent can and auto upload.
Those are those covenants into the system for tracking so I mean, there is lots of examples like that that are going on we've got a pretty active task force pushing on the tools and then on the processes, we want to work through but.
Gregory Garrabrants: We've got a pretty active task force pushing on the tools and then on the processes we want to work through. But I do really believe that it is going to bend the cost curve in the operations side. And then on the software development side, obviously, we have so many cool and interesting things we want to do. And previously, we've been limited by the speed at which the coders can code. And there's just so many really incredible breakthroughs that are occurring at such a rapid pace in the software development process. One recent example is we use a software that essentially creates the screens and call it the Figmas, right, which are just the sort of what the user experience is supposed to look like and that sort of thing. And they rolled out their AI product just this month.
But I do really believe that it is going to bend the cost curve and.
In the operations side and then on the.
On the software development side.
Obviously, we have so many cool and interesting things we wanted to do and previously we've been limited by the speed at which the.
The coders can code.
And there's just so many.
Incredible breakthroughs that are occurring at such a rapid pace and the software development process.
One recent example is how we use our software that essentially creates the screens and call for Sigma is right, which you just see sort of what the user experience is supposed to look like in that sort of thing and they rolled out their AI product just this month.
Gregory Garrabrants: And the team is telling me it takes less than 10% of the time now to basically take a product from conceptualization and get that all organized and get the field validations done and get the user experience ready to be shown and reviewed by the folks that are going to review it. So, I mean, that's just one example, but there's just a lot of stuff going on that I'm pretty excited about. So, yeah, I think it is going to bend the cost curve, and it also, I don't think we'll be successful unless we can say that we're able to deliver a better product faster and cheaper on the software side.
The team is telling me it takes less than 10% of the time now to basically take a product from conceptualization and get that all.
Oregon is and get the field validation is done and get the user experience.
Ready to.
To be to be shown and reviewed by the folks that are going to review. It. So I mean, that's just one example, but there's just a lot of stuff going on that.
I'm pretty excited about so yes, I think it is going to bend the cost curve and also.
I don't think we'll be successful unless we can say that we are able to deliver.
Deliver more better products faster and cheaper on the software side.
Kyle Peterson: Awesome. Thank you very much, and nice quarter.
Awesome, Thank you very much and nice quarter.
Gregory Garrabrants: Thank you.
Thank you.
Speaker 8: Thank you. Our next question comes from the line of David Feaster with Raymond Ding. Please proceed.
Thank you.
David.
With Raymond James.
Johnny Lai: Hi. Good afternoon, everybody.
Hi, good afternoon everybody.
Gregory Garrabrants: Hey, David.
Kyle Peterson: Hi, David.
Hey, David Hi, David.
Johnny Lai: Maybe just, you know, we touched on the loan side a bit. Let's touch on the funding side. Obviously, you've had a lot of success driving deposit growth. I mean, notable success in the consumer direct side. Had some nice tailwinds in the specialty deposits and the commercial and treasury management too. I just, where do you see the most opportunity on the funding side today? How is pricing competition there as industry loan growth is picking up? And just your thoughts on your ability to continue to manage deposit costs lower and still grow?
Maybe just first on the loan side of billets, let's touch on the funding side, obviously, you've had a lot of success driving deposit growth I mean notable success in the consumer direct side.
It had some nice deal wins in the specialty deposits.
Commercial treasury maintenance too I was just where do you where do you see the most opportunity on the funding side today.
Pricing competition there.
History loan growth picking up and just your thoughts.
Thoughts on your ability to continue to.
Deposit costs, lower and still grow.
Gregory Garrabrants: Yeah. Well, I think it really depends on the vertical. And some of the new verticals we've added do come with some pretty nice compensating deposit balances. And so, you know, those are going to be more favorably priced in general. But I do think that as industry loan growth picks up, we might see even some of these middle market clients as we sort of start to take clients and things like that. We've seen some of the competitors try to retain those clients by getting aggressive on the deposit rate. So, you know, I think if our loan growth is accelerated, it's reasonable that there might be a slightly higher funding cost associated with that.
Yeah.
Well I think I think it really depends on the vertical and some of the new verticals. We've added do come with some pretty nice compensating deposit balances and so those are going to be more favorably priced in general, but I do think that as industry.
Loan growth picks up we might see even some of these middle market clients as we sort of start to take clients and things like that we've seen some of the competitors try to retain those clients by getting aggressive on the deposit rates. So.
Yes, I think if our loan growth has accelerated its reasonable that there might be.
Slightly higher funding cost associated with that if the if the loan growth is let's say, we said we're at the higher end of our high single digits low double digits, but if we had loan growth similar to what we had this quarter every quarter in the.
Gregory Garrabrants: If the loan growth is, let's say, you know, we said we're at the higher end of our high single digits, low double digits, but if we had loan growth similar to what we had this quarter, every quarter in the next fiscal year, then I think that that might put a little pressure on funding costs. Of course, it's hard to say because the Axos One product is doing very well. The funding cost there is, you know, it can be reasonable depending upon the mix of checking and savings accounts that come in and a variety of factors there. So, but I think it's not a bad modeling exercise to say if we're growing a lot faster, then there might be a little pressure on funding costs.
And the next fiscal year that I think that that might put a little pressure on funding costs of course, it's hard to say because the access one product is doing very well.
The funding cost there is.
It's.
It could be reasonable depending upon the maxim checking and savings accounts that come in.
And.
In a variety of factors there so but I think it's not a bad modeling exercise the SaaS, where if we're growing a lot faster than there might be a little pressure on funding costs or if we do.
Gregory Garrabrants: Or if we do a big acquisition or even a moderately sized acquisition of an asset pool or a specialty lending business, then that might put a little pressure on growth on the funding side for a little while.
A big acquisition or even a moderately sized acquisition of an asset pool or a specialty lending business that might put a little pressure on growth.
On the funding side for a little while.
Johnny Lai: Okay. But you know, with that, I mean, even if you did have outside growth and maybe a little margin pressure, it's not hard to still see a really strong NII growth profile. You know, you're obviously having a lot of success on the fee side and gaining share with the security side. It sounds like the pipeline is doing pretty good. Do you think that you can keep the fee income growth in line with NII, or what initiatives maybe that you have to help support fee revenue growth, maybe hopefully keeping that proportion relatively stable?
But you know with that I mean, even if you did have the outside growth and maybe a little margin pressure is not hard to still see a really strong NII growth profile.
Youre, obviously, having a lot of stats on the fee side, gaining share with the security side sounds like the pipeline is doing pretty good do you think you can keep the fee income growth in line with NII or what initiatives, maybe that you have to help support fee revenue growth, maybe hopefully keeping that proportion relatively stable yes.
Gregory Garrabrants: Yeah. I think, I mean, remember there was, yeah, look, we did have good growth from the market and then decent growth on net new assets. It's not quite where we want to be. There is a nice pipeline, though. There are some wins that are coming through and getting onboarded that are decent size this coming quarter and the next quarter, which should boost that net new asset growth number. But I think that, you know, we're doing a lot of development on the software technology to be able to have an extremely compelling product. And I think we, you know, we have a good product, but it needs to get better to be best in class. And I think there's, I think that the biggest part of our growth in the fee income side is clearly going to be on the security side in this rate environment.
Yeah.
I think I mean, you remember there was yes look we did have we did have good growth from the market and then.
Decent growth on net new assets, it's not quite where we want to be there is a nice pipeline, though theres some wins that are coming through and getting on board that are that are decent size.
This coming quarter, and next quarter, which should boost that net new asset growth number, but I think that.
We're doing a lot of development on the software technology to be able to have an extremely compelling product and I think we have a good product, but it needs to get.
Better to be best in class and I think there is.
I think that the biggest part of our growth in the fee income side is clearly going to be on the security side in this rate environment and.
Gregory Garrabrants: And we are making good progress there. But to say that that is going to increase at the same level, I think we've got, you know, we've got goals for that, and some of the technology is going to have to come in place and get some adoption there to make that happen. So I think we can do it, but it'll be a little difficult, I think. It won't be, it's not impossible, but it won't be easy.
We are making good progress there, but to say that that is going to increase.
At the same level.
I think we've got.
We've got goals for that and some of the technology is going to have to come in place and get some adoption there to make that happen. So I think we can do it but it'll be it'll be a little difficult I think it won't be decided impossible, but it won't be easy.
Johnny Lai: Okay. And then lastly, just touching on the capital front, I mean, you're still accreting capital, extremely profitable, even with accreting capital in excess of your organic growth. I just kind of wanted to touch on your capital priorities here. You know, the stock's moved, which is great. You know, it makes buybacks a little less attractive, though. And I know the excess capital isn't burning a hole in your pocket, but just wanted to get a sense of your capital priorities. It sounds like M&As might be more in the cards today. It sounds like conversations are pretty good, but just kind of curious some of the types of things you're considering.
Okay.
And then lastly, just touching on the capital front, I mean, youre still accretive capital extremely profitable even with.
Accrete capital in excess of your organic growth. They just kind of wanted to touch on your capital priorities here.
<unk> moved which is great you know makes buybacks a little less attractive though.
And I know the excess capital is it burning a hole in your pocket, but just wanted to get a sense of your capital priorities. It sounds like M&A might might be more of the card today it.
It sounds like conversations are pretty good, but just kind of curious some of the types of things you are considering.
Gregory Garrabrants: Yeah. Well, you know, we have a good organic growth pipeline. We're still looking at different M&A opportunities in a variety of places. We look at fee income businesses. We look at specialty finance businesses if they're a good fit. So, you know, that's always a good place to deploy capital if it's synergistic. And yeah, and then, you know, we'll just, we'll continue to monitor that. You know, we obviously bought back some stock this quarter, but there's been obviously a big move in the stock price too. We still like where we are and feel good about being able to generate earnings that are supportive of that share price. But yeah, I mean, I think it's all in play, and you know, but organic loan growth remains a priority for us.
Yes, well, we have a good organic growth pipeline.
Looking at different M&A opportunities.
Variety of places we look at fee income businesses, we look at specialty finance businesses a fair good fit.
So those that's always a good place to deploy capital if it's synergistic and yes. Then we'll just we'll continue to monitor that we obviously bought back some stock this quarter, but there's been obviously a big move in the stock price too we still like where we are.
And feel good about being able to to generate earnings that are supportive of that.
Share price, but yes.
Yes, I mean, I think I think it's all in play and <unk>.
Organic loan growth remains a priority for us.
Johnny Lai: Terrific. Thanks, everybody.
Terrific.
Thanks, everybody.
Gregory Garrabrants: Thank you, David.
David.
Speaker 8: Thank you. Our next question comes from a line of Jerry Tenner with CA Davidson.
Our next question.
Davidson.
Yes.
Kyle Peterson: Thanks. Good afternoon. Question on the multifamily loan sale. Just curious about kind of, you know, the kind of reasoning behind it. Obviously, the yields must have been pretty good there given the gain that you picked up. So just curious about the thought process around that. Obviously, you had great net loan growth regardless, but you know, any color?
Thanks, Good afternoon.
Question on the multifamily loan sale I'm, just curious about kind of the kind of reasoning behind it obviously, our yields must have been pretty good there given the gain that you picked up so just curious about the thought process around that obviously you had great net loan growth regardless, but.
And you know any color.
Gregory Garrabrants: Oh, yeah. No, it was, you know, I think when we look at loans and we see what we think about them from a standpoint of where, you know, they are from a credit perspective and, you know, and look at what we think about them. And so there was some good buyers that were interested in some loans, and so we decided to sell that particular loan.
Oh.
Yes, no it does.
I think when we look at loans and we see what we think about them from a standpoint of.
Of where they are from a credit perspective and.
I look at what we think about them and so.
There was some good buyer.
Buyers that were interested in some loans and so we.
We decided to sell.
That particular loan.
Kyle Peterson: Was that a single loan? Just a single large loan or a basket of loans?
Was that a single loan that's just a single large loan or a basketball.
Gregory Garrabrants: It was a few others.
It was a few others, yes, there is a handful of loans that were sold.
Kyle Peterson: Yeah. There was a handful of loans that that were sold. Okay. All right. Great. And then as you think about 2026, and I know that you've, Greg, you mentioned, you know, expectations of being towards the mid to higher part of your loan growth range. Obviously, CNI has been pretty strong throughout fiscal 2025, and now you saw Crescel, you know, this current quarter really pick up. So those two, I would imagine, are the largest drivers, probably the best majority of loan growth for the year. Is there anything else that you think could accelerate?
Okay.
Alright, great and then.
As you think about 2026 and I know that you Greg you mentioned are.
You know expectations of being towards the mid to higher part of your loan growth range. Obviously C&I has been pretty strong throughout fiscal 2025, and now you saw crustal Oh this current quarter really pick up so.
Two I would imagine are the largest drivers probably the vast majority of loan growth for the years or anything else that you think could accelerate.
Gregory Garrabrants: I think cap call can can do something. I think the lender finance businesses, both real estate and non-real estate, can as well. You know, jumbo mortgage started to grow again. It's not going to be massive, but the pipeline there is pretty good. So I think we could have pretty balanced loan growth across, but I, you know, those are probably, you know, the biggest categories. I mean, you know, I think that, I think that, you know, we have a lot of the good part of our business is it's just so diverse that, you know, you may have some movements within quarters, but, you know, we can look across the board and look at the pipelines and see where we are there. I mean, Crescel is a little tough because sometimes our prepayments can come there that are relatively unexpected and move that number around.
I think cap call Ken can do something.
Thank Phil lender finance businesses, both real estate non real estate, Canada as well.
Jumbo mortgage started to grow again, it's not going to be massive but the pipeline. There is pretty good. So I think we can have a pretty balanced loan growth.
Across but those are probably.
The biggest categories I mean.
I think I think that.
I think that we.
We have a lot of.
The good part of our business is so diverse that you may have some movements within the quarters, but we can look across the board and look at the pipelines and see where we are there I mean crystal is is a little tough because sometimes our prepayments can come there that are rare.
<unk> I expect that and move that number around so I think we can be much more certain about the.
Gregory Garrabrants: So, you know, I think we can be much more certain about the aggregate numbers and about the individual categories.
The aggregate numbers, then about the individual categories.
Kyle Peterson: Okay. And if I could ask one more question, you kind of reiterated the goal on the kind of comp line to not exceed 30% of revenue growth or NII growth. So in terms of the tax benefit that you're getting from the California change, you know, I guess the question would be, does that free up any additional source for investment, or that goes to bottom lines?
Okay.
That's one more question you kind of reiterated the goal on the comp line to not exceed 30% of revenue growth or NII growth.
So in terms of the tax benefit that you're getting from the California change.
No.
I guess the question would be does that free up any additional stores for investment or that goes to the bottom line.
Gregory Garrabrants: No, that goes to the bottom lines.
That customer.
Kyle Peterson: I think the executives wish it would, but Greg's holding up tight.
I wish it was filled in that study.
Gregory Garrabrants: No, it's a disciplined measure. And, you know, to my knowledge, nobody was actually involved with the lobbying of the California legislature to give us such a beneficence and basically pound other banks that are not located in California. So, no, I mean, in all seriousness, I think that's a pre-tax. It's just a very simple number. If you take the revenue growth from non-interest revenue and interest revenue, you add it up, you look at the difference. Obviously, there could be some one-time items in there, and you don't have compensation or professional service expenses additively grow that, and it's a pre-tax ratio. So that's what it is. And I think, obviously, look, at any one quarter, you know, we hired this floor plan team. Derek said that's going to cost about a million a quarter.
All right.
It's a.
It's a disciplined measure.
<unk>.
To my knowledge nobody was actually.
With the with a lobbying of.
The California legislature too.
Give us such a.
Beneficence and.
Basically pound other banks that are not located in California. So.
In all seriousness I think.
That's a pre tax it's just a very simple number is.
If you take the you take the revenue growth from non interest.
Revenue and interest revenue you added up you look at the difference obviously, there could be some onetime items in there and you don't have compensation or professional services expenses additive, we grow that and Thats a pre tax ratio. So that's what it is and I think obviously look at.
Any one quarter.
We hired this floor plan team.
Derek said thats going to cost about $1 million a quarter.
Gregory Garrabrants: You know, but I mean, over the year, we intend to hit that number and make sure that that happens. And that's not saying that we can't do better with AI and whatever it is, but that's a public goal that the team is going to hit.
But I mean over the over the year.
Intend to hit that number and.
And make sure that that happens and that's that's not saying that we can do better with AI and whatever it is but that's.
That's a public goal that the.
The team.
It's going to hit.
Got it thank you.
Kyle Peterson: Got it. Thank you.
Speaker 8: Thank you. Our next question comes from a line of Kelly Mota with KBW. Please proceed.
Thank you.
It comes from the line of Kelly Motta with <unk>.
Please proceed.
Kelly Motta: Hey. Good afternoon. Thanks for the question and congrats on 25 years. Very, very cool you get to celebrate on the 4th of July. Greg, maybe with the Genius Act coming out, I believe before the Silver Gates blew up, you were potentially looking into stablecoin and digital assets. Can you refresh us now that there's additional color as to and a more conducive regulatory environment? If there's any update as to how you're thinking about it and interest in pursuing it?
Hey, good afternoon. Thanks for the question and congrats on 25 years very very cool.
Great.
Fourth of July.
Maybe maybe with.
The genius App coming out I believe before the subrogation.
You were potentially looking into stable coin in and digital assets can you refresh us now that.
There is additional color on cat M and all that.
More conducive regulatory environment, if theres any update as to how you're thinking about it and interest in.
Personally yet.
Gregory Garrabrants: Yeah, sure. And there's still some things that I may be that are in process. So I'll give you some preliminary thoughts, and then there will be others to come. You know, in our self-directed business, we've been allowing the crypto trading side. We haven't really pushed it very much with allowing the ETFs and those sort of things on the crypto side. And we've been allowing that for a while. That, you know, our self-directed business is pretty, it needs to have some technological sort of upgrades just from a standpoint of the user experience and stuff. It's not really as competitive as it should be and hasn't been a big focus for us.
Yes sure.
And there are still some things that I may be where they are in process. So I'll give you some preliminary thoughts and then there will be others to come.
And our self directed business, we've been allowing.
The crypto trading side, we haven't really pushed it.
Very much with that allowing the etfs and those sort of things on the crypto side, we've been allowing that for a while.
Our self directed business is pretty it needs to.
You don't have some technological sort of upgrades just from a standpoint of the user experience and stuff it's not.
Really as competitive as it should be and Hasnt been a big focus for us.
Gregory Garrabrants: But I think given that the crypto side could become more important, that might be a vehicle for some of those, some of the transactional-related and payment-related activities that are there because we're already doing that. And just we can expand that a little bit or make the user experience better. You know, we did not, when the administration changed, you know, we've with respect to what we've done on the crypto banking side, you know, there was a complex set of sort of rules around what we would accept and what we wouldn't based on sort of a risk profile around what different companies were doing and whether or not there was regulatory clarity around how those companies were being treated. And so, you know, when the administration changed, we've been more willing to look at those accounts and those sort of things and kind of do that.
But I think given that.
Is that the crypto side could.
Become more important that might be a vehicle for.
For some of those.
Some of the.
The transactional related and payment related activities that are there because we're already doing that.
And as we can expand that a little better make the user experience better.
We we did not win.
When the administration changed.
We've.
With respect to what we've done on the crypto banking side.
There is a it was a complex set of sort of rules around what we would accept and while we wouldn't based on sort of a risk profile around what different companies were doing and whether or not there was regulatory clarity around how those companies are being treated and so.
When the administration changed we've.
A bit more willing to look at those accounts and those sort of things and kind of do that.
Gregory Garrabrants: You know, with respect to, you know, how I'm thinking and how we're thinking broadly about, you know, stablecoin, I'd say that, you know, I'm not going to have a lot of public comments on that now, but we are focused on it and thinking through it and looking at exactly, you know, how it should integrate into everything we're doing. So obviously, a lot of change and movement recently, and you know, we're thinking hard about it and paying attention to it.
With respect to.
How I am thinking and how we're thinking broadly about.
Stable client I would say that I'm not going to have a lot of public comments on that now but.
But we are focused on it and thinking through it and looking at exactly.
How it should how it should integrate into everything we're doing so obviously a lot of change in movement recently.
We're thinking hard about it and paying attention to it.
Speaker 8: Got it. Thanks for the color. That's helpful. Maybe switching to the funding side, you had some nice EOC growth in Dottie's sharing this quarter. Wondering if there was any, you know, end-of-period flows that impacted that. And just more broadly speaking, which areas of the business are seeing the best growth in just core operating accounts? Because you did have very nice deposit growth this quarter.
Got it thanks for the color that's helpful.
Maybe the.
The funding side.
You Tonight.
Johnny.
Wondering if there was any.
Yes.
And the period flows that impacted that.
Thank you.
<unk>.
In the past.
Core operating accounts.
Gregory Garrabrants: Yeah. The specialty, the commercial specialty side has some real bright spots and continues to grow there. The tech business that we brought on through that team is doing well and bringing on a lot of core deposits there. So it's nice to see some success with that team, and that's been steady. And then the middle market team as well is doing the same thing. And then a lot of cross-sell across all the lending verticals. I think we do a really good job on the payment side and with the API infrastructure we have on the commercial side that, you know, leads a lot of clients who have some pretty sophisticated payment needs to choose us. And those are nice clients because when they integrate with us from a software perspective, they tend to be pretty sticky.
Yes.
The specialty the commercial specialty side as some some real bright spots it continues to grow there.
<unk>.
The tech.
Business that.
We brought on through that team is doing well and bring in a lot of core deposits. There. So it's nice to see some success with that team and that's been steady and then the middle market team as well as doing the same thing.
And then a lot of cross sell across all the lending verticals I think we do a really good job on the payment side and with the the API infrastructure, we have on the commercial side that.
A lot of clients, who have some pretty sophisticated payment needs to choose us.
Those are nice clients, because when they integrate with us from a software perspective, they tend to be pretty sticky. So yes. It really hasnt been any one thing, but it's been a lot.
Gregory Garrabrants: So, you know, it really hasn't been any one thing, but it's been a lot, you know, across the board in those categories that I just talked about, so.
The board in those categories I just talked about.
Speaker 8: Got it. That's helpful. Maybe last question for me. It seems like asset quality held in really strong. Just wondering, Greg, any areas that you're, you know, any update as to what you're looking at and watching more carefully? Just to round out questions on credit, that would be great.
Got it that's helpful maybe.
Last question for me it seems like asset quality.
Strong just wondering Greg any areas that you're right.
Any update as to what Youre looking at and watching more carefully.
To round out our questions on kind of that that would be sure.
Gregory Garrabrants: Sure. Sure. Yeah. I think, you know, the commercial real estate side looks really, really good. You know, and then on the CNI side, you know, as we continue to, you know, work with different banks and do, you know, club stuff and things like that and do some syndications, you know, I expect that they'll, you know, we'll always have a handful of stuff rattling around. But in most cases, I think those things will work out, you know, reasonably well, just given the, you know, the enterprise value of the businesses. But, you know, I think on the CNI side, I think it'll, you know, we've had, if you look at our, I mean, I think our, you know, our Crescel losses are, I think, I don't think we've really had any, you know, of any, right?
Sure, Yes, I think.
Commercial real estate side looks really really good.
Yeah.
<unk>.
And then on the on the C&I side.
There as we continue to work with different banks and do.
Club stuff and things like that and do some syndications.
Back that they'll we'll.
We will always have a handful of stuff rattling around.
But in most cases I think those things will work out.
Reasonably well just given the.
Enterprise value of the businesses, but.
I think on the C&I side I think.
If you look at our domain I think are our cressa losses are.
I don't think we've really had any.
Gregory Garrabrants: And then I think in all our time in multifamily, you know, a couple basis points maybe in 25 years in single family, the same way. You know, I think, I think that the CNI side, as we're doing more sort of average bank stuff, you know, we'll probably have, you know, hopefully, we'll do better than average. But, you know, there'll always be, you know, I think, something there, but nothing of any, you know, significant materiality, so.
Right and then I think in all of our time in multifamily a couple basis points may be in 25 years and single family. The same way I think I think that the C&I side as we're doing more sort of average bank staff.
We have.
Hopefully, we'll do better than average, but there will always be I think something that.
There, but nothing of any <unk>.
Significant materiality so.
Speaker 8: Great. Thank you for the time. I'll step back next quarter.
Great. Thank you for the time.
I'll step back.
Gregory Garrabrants: Okay. Thank you, Skilly. Thank you, Kelly.
Okay. Thank you thanks, Kevin Thank you Kelly.
Speaker 8: Thank you, sir. No further questions at this time. I'd like to pass the call back over to Donnie Wise for any closing remarks.
Hum.
Hum.
Okay.
Thank you.
Johnny Lai: Great. Thanks for everyone's participation, and we'll talk to you next quarter.
Great. Thanks for everyone's participation and we'll talk to you next quarter.
Speaker 8: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Todays teleconference. You may disconnect your lines at this time, thank you for your participation.
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