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Axos Financial, Inc. (NYSE:AX)
Q4 2019 Earnings Call
Jul 30, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to Axos Financial's Fourth Quarter 2019 Earnings Call.[Operator Instructions]. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. I would now like to turn the conference over to Johnny Lai, Vice President, Corporate Development and IR. Thank you, please begin.

Johnny Lai -- VP, Corporate Development & IR

Great, thank you. I'd like to welcome everyone to Axos Financial Inc's Fourth Quarter and Fiscal Year 2019 Financial Results Conference Call. With me today are, the Company's President and Chief Executive Officer, Greg Garrabrants and Executive Vice President and Chief Financial Officer Andy Micheletti. Greg and Andy will review and comment on the financial and operational results for the 3 and 12 months ended June 30 2018 and they will be available to answer questions after the prepared remarks.

Before I begin, I would like to remind listeners that 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. These forward-looking statements are made on the basis of current views and assumptions of management regarding future events and performance.

Actual results could differ materially from those expressed or implied in such forward-looking statements as a result of risks and uncertainties. Therefore, the company claims the Safe Harbor protection pertaining to forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 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 of this call were provided on the conference call announcement in today's earnings press release.

At this time, I would like to turn the call over to Greg for his opening remarks.

Gregory Garrabrants -- - President, CEO & Director

Thank you, Johnny. Good afternoon, everyone, and thank you for joining us. I'd like to welcome everyone to Axos Financials conference call for our fourth quarter and fiscal 2019 year end ended June 30, 2019. I thank you for your interest in Axos financial, Axos Bank, and Axos Securities. Axos announced record net income of $155.1 million for the fiscal year ended June 30 2019, up 1.8% over the $154 million earned for the fiscal year ended June 30, 2018. Axos return on average equity for fiscal 2019 was 15.4% and the bank's efficiency ratio was 40.51%.

Fiscal 2019 earnings per share increased 4.6% to $2.48 per diluted share compared to $2.37 per diluted share in the fiscal year-end 2018. Excluding acquisition-related expenses and non-recurring costs related to excess FDIC expenses and a client related trading loss in our clearing business.

Non-GAAP earnings per share increased 15.1% to $2.75 per share in fiscal 2019 equating to a non-GAAP return on equity of 17.1%. Net income for Axos's fourth quarter ended June 30, 2019 was $40.6 million, up 9.5% when compared to the $37.1 million earned in the fourth quarter ended June 30, 2018. Earnings attributable to Axo's common stockholders were $40.6 million or $0.66 per diluted share for the quarter ended June 30, 2019, compared to $0.58 per diluted share for the quarter ended June 2018 at $0.63 per diluted share for the linked quarter ended March 31, 2019 in which we recognize the vast majority of our tax related revenue.

Other highlights for the 2019 fiscal year and the fourth quarter include, net loans and leases increased by $283.7 million in the fourth quarter, representing 3.1% growth linked quarter and an annualized growth rate of 12.4% for the full-year ended June 30, 2019. Net loans and leases grew by $949.8 million, representing 11.3% growth year-over-year.

Total assets reached $11.2 billion at June 30, 2019, up 1.7 billion or 17.6% when compared with June 30, 2018. Net interest margin was 3.81% for the quarter ended June 30, 2019, up 10 basis points from 3.71% in the fourth quarter of fiscal 2018. Excluding average balances associated with short-term H&R Block lending products and Axos H&R Block liquidity. Net interest margin was 3.81% in the fourth quarter of 2019, up one basis point from 3.8% in the comparable period a year ago. Our bank only net interest margin without H&R Block was 3.87%, up four basis points from 3.8% in the fourth quarter of 2018. Loan yields increased 17 basis points year-over-year to 5.56% in the quarter ended June 30, 2019. and that shift resulting from higher yielding C&I loans.

For the fiscal year ended June 30 2019, our consolidated net interest margin was 4.07%, roughly in line with the prior fiscal year with bank only net interest margin remaining steady at 4.14% in the fiscal year, 2019 and fiscal year 2018. Non-interest income increased by 36.8% in the fourth quarter to $23 million from $17 million in the fourth quarter of fiscal 2018. Growth in non-interest income was boosted by fees in deposit related revenue from securities clearing and by higher prepayment penalty fee income. Return on equity was 15.4% for the fiscal year 2019, compared to 17.05% for the fiscal year 2018.

Excluding acquisition-related expenses and non-recurring expenses related to Axos FDIC insurance and a client related trading loss in our clearing business. Our non-GAAP return on equity was 17.1% for fiscal year 2019. As we grow our fee income business from securities related in commercial banking, they are more capital efficient than our consumer and commercial lending businesses, we believe we'll be able to further improve our return on equity.

Our efficiency ratio was 51.12% for the full-year fiscal 2019 and 53% for the fourth quarter of fiscal. 2019. The primary drivers of the year-over-year and sequential increase in our efficiency ratio with the additions of COR Clearing and the WiseBanyan acquisition and the reserve for potential losses related to a corresponding Clearing client.

Excluding the $15.2 million reserve recorded in the third quarter of 2019 related to the corresponding Clearing client. Operating expenses of $65.5 million were down approximately $1 million from Q3 2019 to Q4 2019. The efficiency ratio of our banking segment was 40.51% for the year ended June 30, 2019, compared to 34.5% for the comparable period a year ago. The primary drivers of the year-over-year increase in our banking efficiency ratio were investments in technology branding, new business initiatives and the inclusion of Axos fiduciary services, which operates at a higher efficiency ratio than our other banking businesses to provides a solid source of fee income and low-cost deposits.

Excluding merger related costs non-GAAP efficiency in fiscal 2019 would have been 39.2% for the banking business segment. Our securities business segment had an efficiency ratio of 88.1% for the fiscal year 2019, excluding merger-related costs, acquisition related amortization expenses and our provision related to trading losses for an Axos Clearing client. The fourth quarter ended June 30, 2019, was the first quarter that we included a full quarter's contribution from our Clearing and Robo-advisory businesses. Although over the intermediate term, we will improve the efficiency of the clearing business as we bring them into our process improvement framework and introduce automation in a variety of areas. As a fee-oriented business, the clearing business has the potential to run of the significantly higher return on capital as we grow the business given the business is focused primarily on fee income and suite balances that can be placed off balance sheet or replace existing bank deposits and consume no additional capital.

As we discussed on last quarter's call, investments we are making an existing a new businesses with an Axos clearing and Axos invest, our digital wealth management platform will constrain the near-term profitability and returns in the securities business segment relative to their long-term potential. Earning a securities clearing custody and digital wealth management platform is critical for us to realize our long-term consumer banking vision and will be additive to the quality of our customer base earnings and growth.

Our credit quality remains strong. The bank had 19 basis points and net charge-offs in fiscal 2019 and ended the year with only 51 basis points of non-performing loans of total loans. Of the 19 basis points of net charge-offs in the fourth quarter, 13 basis points or 68% was attributable to losses from refund advance loans we originated in the third quarter of 2019. Our allowance for loan loss represents a 117% coverage of our nonperforming loans. Our effective tax rate was 26.6% in the quarter ended June 30, 2019, compared to 26.4% in the comparable quarter a year ago. Our tax rate in the fourth quarter benefited from the federal rate reduction under the Tax Cuts and Job Act of 2017. Our tax rate for fiscal year 2019 was 27.1%. We expect our GAAP tax rate to be in the 26% to 28% range for our fiscal year 2020, which began on July 1, 2019.

We generated strong loan growth in the fourth quarter led by robust loan originations in commercial real estate multifamily, C&I lending and mortgage warehouse. Despite elevated pay-offs in our jumbo single-family lender finance and commercial specialty real estate loans, ending loan balances increased by $283.7 million in the fourth quarter and $949.8 million in fiscal year 2019, representing annualized growth of 12.4% and 11.3% respectively.

We originated approximately $1.77 billion of gross loans in the fourth quarter, up 8% year-over-year. Originations for investment increased 10.3% year-over-year to $1.5 billion and 41.2% linked quarter when you exclude the $1.16 billion of seasonal refund advance loans we originated in the quarter ended March 31, 2019.

Our loan production for the fourth quarter ended June 30, 2019 consisted of $102 million of single-family agency eligible gain on sale production, $318 million of single-family jumbo portfolio production, $149 million of multifamily and other commercial real estate portfolio production, $861 million of C&I production, resulting in a $143 million of net C&I loan growth and $52 million of consumer unsecured and auto production. For the fourth fiscal quarter's originations, the average FICO of single-family agency eligible production was 731 with an average loan-to-value ratio of 75.6%.

The average FICO for the single-family jumbo production was 735 with an average loan-to-value ratio of 63.5%. The average loan-to-value of the originated multifamily loans was 56.2% and the debt service coverage was 1.1. The average loan-to-value ratio of the originated small balance commercial real estate loans was 52.1% and the debt service coverage was 1.36.

The average FICO of the auto production was 758. At June 30, 2019, the weighted average loan-to-value ratio of the entire portfolio of real estate loans was 66%. These loan-to-value ratios use origination date appraisals over current amortized balances. As of June 30, 2019, 62% of our single-family mortgages have loan-to-value ratios below 60%, 30% have loan-to-value ratios between 61% and 70%, 2% have loan -to-value ratio is between 71% and 75%, 5% between 75% and 80%, and less than 1% have a loan-to-value ratio greater than 80%.

We have a well-established track record of strong credit performance in jumbo single-family mortgage lending with lifetime credit losses in our originated single-family loan portfolio of three basis points of loans originated. Originations in our single-family jumbo mortgage lending business rebounded this quarter with $318 million, up 33% in the $239 million in the quarter ended March 31, 2019

Improved sentiment among high net worth homebuyers and a recovery from the holiday seasonality with their primary tailwinds for the sequential improvement in our jumbo mortgage loan production. Prepayment rates remain elevated resulting in ending loan balances dropping modestly from March 31, 2019.

We continue to believe that our jumbo single-family mortgage loan portfolio will grow in the low mid single-digit range in fiscal 2020. Ending balances for our multifamily loan portfolio increased by approximately $37 million or 8.64% annualized to $1.8 billion at June 30, 2019, representing approximately 19% of our total loan book.

The weighted average loan-to-value ratio of our multifamily loans was 33% based on appraised value at the time of origination, approximately 68% of our multifamily loans are under 60% LTV, 30% are between 60% and 70% loan-to-value, and only 2% are between 70% to 75%, and no multifamily loans have a loan-to-value ratio above 75%. The lifetime losses in our originated multifamily loan portfolio are less than one basis points of loans originated over the 18 years we've originated multifamily loans.

Our C&I lending business had another strong quarter with broad based strength in originations in our lender finance, equipment finance and commercial specialty lending groups. We continue to focus on well secured well structured asset-based loans and lines to credit-worthy borrowers financing high quality projects in attractive markets in our lender finance and commercial specialty real estate businesses.

Our commercial lending teams continue to grow in terms of relationships products and expertise. The experienced bankers we added in our New York and Los Angeles offices have good pipelines and will produce incremental growth in commercial loans and deposits in fiscal 2020. Loan demand remains strong across a number of our lending categories as reflected in our $1.2 billion consolidated loan pipeline, which consists of $446 million of single family jumbo mortgages, $152 million of single-family agency mortgages, $150 million of income property loans and $444 million of C&I loans.

We continue to transition our portfolio away from single-family lending into C&I lending in commercial real estate lending. Demand for auto and consumer unsecured lending remains solid, even as we maintain disciplined underwriting optimize our marketing and expand our distribution We anticipate strong originations across our auto small business commercial real estate and C&I lending groups as they identify new opportunities that meet or exceed our risk adjusted return criteria. On an annual basis, we target overall loan growth in the low teens, which we believe is prudent given the competitive landscape for loans and deposits, the credit cycle in the shape of the yield curve.

Switching to funding. Total deposits increased $1 billion or 12.5% year-over-year with growth across various consumer and commercial deposit categories. Checking and savings accounted for approximately 74% of total deposit balances at June 30, 2019, up from 71% at March 31, 2019, as we replace the expected run off of nationwide CDs with commercial and lower cost deposits. Our deposit base is diversified across a variety of consumer and business product verticals, which helps offset some of the competitive funding pressure.

At June 30, 2019, approximately 41% of our deposit balances were business and consumer checking accounts, 20% money market accounts, 4% IRAs, 5% savings, and 5% prepaid accounts. The addition of the deposits from Nationwide and the MWA Bank acquisitions and the growth in our bankruptcy related deposits have been instrumental in our ability to grow deposits and optimize our cost of funds to offset a challenging yield curve and competitive landscape for loans and deposits.

The integration of the COR Clearing and WiseBanyan digital wealth acquisitions are progressing well. The two businesses, which have been or will be rebranded Axos declaring and Axos invest provide us with a solid foundation from which we can expand our securities servicing, wealth management, and private label banking services to IRAs, independent broker-dealers and their underlying retail clients

In our internal market research and the diligence process of these and other potential securities based servicing and advisory businesses, we saw several structural demographic and industry trends that provide opportunities for Axos. First industry consolidation driven partly by fee compression for active and passive investment managers, and by the transition from commission to fee based models has resulted in smaller and midsize IRAs and brokers receiving less, less attention from the big four securities and clearing firms purging national TV and Schwab's. Service levels for these IRAs have declined and the GAAP between the large and small IRAs get from a technology pricing and product perspective continue to widen. As one of the few independent clearing firms focused on serving small IVDs and IRAs. We see opportunities to take market share through a better and more focused and efficient service model.

Second, thousands of advisors continue to leave large wirehouses, such as Merrill Lynch, Morgan Stanley, and Wells Fargo to become independent advisors. This dynamic is driven by better economics and more autonomy over their practice for the advisors by going independent. The downside of leaving the Wirehouses that advisors lose their ability to pay provide banking and lending services to their high net worth clients. We see tremendous opportunity to provide a comprehensive set of consumer banking and lending services to individual advisory clients of independent IRAs, leveraging the reputation, and experience we have with our Axos advisor business and adding new capabilities we have through acquisition and internal development.

A third macro trend is that more advisors than ever are nearing retirement and a large majority of these baby boomers on small advisory practices with one or two principles with no succession planning in place. While existing competitors are focused on large transactions involving firms with $1 billion of assets under management in greater. Small IRAs and IVDs have very few options if they want to sell transition their practice. Through Axos Bank and Axos Securities, we are building a comprehensive platform to deliver lending banking and securities services to independent IRAs is and IVDs to help them manage and monetize their practice.

Lastly, the digitization of wealth management and retail brokerage is a natural evolution that provides opportunities for digital bank like Axos to expand its consumer product offering. Just as consumer banking personnel and student lending and many other parts of financial services have accelerated their transition from offline to online and mobile channels, due to lower costs, more convenience and a better user experience for digital channels. We believe that more consumers will migrate to digital providers that can deliver banking financial planning investing and asset protection services in work streams that are early part of their everyday lives.

This is one of the primary reasons, we decided to build EDB, our online banking platform. The personalization engine and central data warehouse coupled with new services and features. We are building in the next iteration of EDB give us a clear path to be able to deliver on the experiences and functionalities that consumer and small business owners want from their financial services provider. It's a daunting task that requires detailed planning, lots of testing and iteration and collaboration across business and functional units. It's equally exciting, because of the vast opportunity, it could potentially generate from an operational efficiency, customer service and revenue growth and branding perspective.

Securities based lines of credit and margin lending represent meaningful long-term revenue opportunities and the source of incremental revenue from our securities business in the short-term if client uptake ramps faster than we expect. These businesses tend to grow faster when the stock market is appreciating and clients are looking to increase investments. There are nice balance to client cash balances which tend to be counter cyclical as investors and advisors hold more cash when they are more risk averse.

We're also looking at other sources of fee income in the clearing business. We continue to believe that the combined security business, which includes Axos Clearing and WiseBanyan will operate at a high 80s and low 90s efficiency ratio for this coming fiscal year as we integrate WiseBanyan into the universal digital bank and begin cross-selling digital investment advisory services to banking clients and providing banking services to our digital investment advisory clients. As we invest in infrastructure to provide clearing services to larger broker dealers, we expand the platform to provide more services to IRAs and monetize the pipeline and firms interested in converting to Axos Clearing.

We're seeing good progress in our strategic initiatives to grow and expand our commercial banking business. Access fiduciary services, the trustee and fiduciary services business acquired from Epiq in April 2018, continues to perform well. Our trusted relationship managers and senior business leaders, continue to work alongside bankruptcy trustees and fiduciaries nationwide to provide the essential services they need to administer track and report on Chapter 7 bankruptcy and other non-seven legal matters.

Concurrently, we are making good progress on our next-generation cloud-based bankruptcy software platform called The Entity, with enhanced functionalities that will make it easier for trustees and trustee assistance to Axos and administer our client in case data, unity will further strengthen our competitive position in the marketplace.

We look forward to hosting our trustees at the annual NABT Conference in Denver next month. A second component of our commercial banking strategy is expanding our geographic presence and industry expertise through selective additions of experienced bankers and banking teams. We had an experienced team on the East Coast to target general middle market deposits and select specialty deposit verticals and opened our office in Manhattan last quarter to accommodate that team and other securities personnel.

This group will work side-by-side with our existing commercial lending and significant existing lending book of business in that market. This team already has a robust pipeline of exciting deposit and lending opportunities. We're also making good progress on West Coast commercial banking expansion with our new office slated to open in downtown LA later this quarter.

Many of our senior commercial bankers who have been servicing that market, but currently working in our Orange County or San Diego offices will relocate to Los Angeles, where they live to enhance the focus on specialty lending and deposit opportunities in Southern California. Deposit competition remains high across the industry, coupled with the flat yield curve. These dynamics have created downward pressure on net interest margins for many banks. We were able to expand our net interest margin in this cycle of higher short-term rates and a flat yield curve with net interest margin expansion of 10 basis points year-over-year to 3.81% on a consolidated basis, including the securities segment and a 12 basis point expansion of the bank.

Excluding the impact from H&R Block related loans and deposits, our net interest margin for the banking business unit increased by four basis points to 3.87% in the fourth quarter of 2019. This margin expansion was the result of strong growth in our floating rate C&I loan portfolio and a lower growth in our fixed rate jumbo single family mortgage book, and improvements we have made in the quality of our deposit base, including our investments in our consumer platform. Our focus on growing our commercial banking deposit verticals and our entry into thebankruptcy trustee and clearing space.

With respect to the sensitivity of loan yields to short-term declines in LIBOR or other indexes, I believe Axos is in a relatively good position with respect to its portfolio. Of the bank's portfolio approximately 50% of the loans are jumbo single-family loans with rate floors at the start rate less than 6% of the single-family loans are above their current start rate, meaning the decline in short-term rates will have no impact on the underlying loan rate for 94% of that single-family portfolio. Additionally 25% of the loan book in the multi-family and commercial real estate loan types have a similar dynamic with rate for us at the start rate with less than 8% of that portfolio currently above their floor rates. Of the remaining 25% of the book classified as C&I loans, less than $260 million of loans have floor rates below 5% and only $30 million of loans have a rate floor below 4% with no loans for the range floor below 3.5%.

We expect approximately 72% or approximately $1.8 billion of the C&I portfolio to reprice, with the first 25 basis point rate reduction and 66% approximately $1.6 billion. And the second 25 basis point rate reduction with less than $900 million of our entire portfolio, continuing to reprice in a 100 basis point decline in short-term rates.

Although we are in a reasonably good position from a portfolio perspective with respect to loan rate reductions as a result of a potential decline in short-term rates. We do not believe that deposit pricing and competition, given our growth objectives with the client commensurately in all segments, with the potential rate reduction such that we will be able to realize immediate rate reductions in all segments of our deposit portfolio.

Therefore we continue to maintain our net interest guidance in the 3.8% to 4% range for the intermediate term. We completed another successful tax season with H&R Block clients provide them approximately $1.6 billion of refund advance and emerald advance loans and distributing over $17 billion of refunds to block customers to the refund transfer program with credit losses in line with expectations.

Our emerging businesses continue to grow. Our indirect auto lending business, which focused on serving prime customers primarily for purchase transactions generated approximately $160 million of loan production in the year ended June 30, 2019. Our credit quality in this book remains very strong with delinquencies over 60 days at nine basis points of auto loans outstanding. We continue to scale this business in a controlled manner, while testing cross selling

Initiatives inside our consumer banking platform and new distribution channels over the next several quarters. I'd like to congratulate our team members for helping Axos achieve another year of record earnings, continued strong credit quality and exemplary service to our clients and business partners. We maintain strong growth in clients, loans and earnings. While we integrated five acquisitions, loss new strategic partnership with Nationwide, opened three new offices, rolled out our new online banking platform and completed the successful rebrand.

Our capital and credit metrics with tier one leverage to adjusted average asset ratio of 9.21 for the bank and 8.75% for the Holding Company at June 30 ,2019, affords us with the flexibility to invest in strategic initiatives, opportunistic M&A and share repurchases. With our strong and growing capital base and highly profitable business model, we were able to fund all our acquisitions with Axos capital while buying back approximately $47.8 million of stock and the 12 months ended June 30 ,2019. Our strategic focus and priorities for capital have not changed. While I share in your disappointment that our strong financial results have not resulted in a commensurate stock performance.

We are committed to making prudent capital allocation decisions to maximize returns for our shareholders. Before I turn the call over to Andy to provide additional detail on our financial results for Q4 and fiscal 2019. I'd like to invite you to San Diego, October 31, for our Investor Day. We plan to provide additional details regarding our strategic plan and growth initiatives. It's a great opportunity to meet other members of our executive and management teams. Details for Investor Day will be included in email that will go out later this week.

The event is by invitation-only and space is limited. Please contact Johnny Lai, VP of Investor Relations if you'd like to attend and did not receive an email invitation. Andy?

Andrew Micheletti -- EVP & CFO

Thanks, Greg. First, I wanted to note that in addition to our press release, our 8-K was filed with the SEC today is available online through EDGAR or through our website at axosfinancial.com. Since our fiscal year ended on June 30, we will file our 10-K by the end of August. Second, I will highlight a few areas, rather than go through every individual financial line item. Please refer to our press release of 8-K for additional details.

For the quarter ended June 30 ,2018, net interest margin was 3.81%, up 10 basis points from the quarter ended June 30 ,2018. As a result of the acquisition of COR Clearing in March 31, 2019 quarter, the consolidated net interest margin includes the impacts of securities margin lending and borrowing to fund those securities activities In our press release in 8K this quarter, we have added a separate banking segment calculation of our net interest margin. For the quarter ended June 30 ,2019, the banking segment net interest margin was 3.87%, up 12 basis points from the quarter ended June 30, 2018. The banking segment net interest margin, when excluding the seasonal impact of H&R Block for the quarter ended June 30, 2019, was 3.87%, up four basis points from the fourth quarter of 2018. There was no net impact in this year's fourth quarter from the H&R Block loans and excess liquidity versus a nine basis point impact in the fourth quarter of 2018 due to capital constraints related to the seasonal excess liquidity that no longer exists. Despite deposit competition and challenging yield curve, we had a solid improvement in our bank's net interest margin, helped in part by strong growth in our non-interest bearing deposits.

Shifting now, our credit quality remains good with a total of 19 basis points of net charge-offs this fiscal year, the same as last year. If you exclude the 13 basis point loss associated with the refund advance loans and the two basis point loss from our unsecured consumer loans, our net charge-offs to average loans and leases was four basis points for the year ended June 30 2019.

The credit performance of the refund advance loans this year, it's in line with our expectations. We had $2.4 million of refund advance loans outstanding at June 30 2019, which we recorded as a receivable from July 1 of 2019 to July 30, we received approximately $1 million more RIA payments bringing in the RIA receivable balance to approximately $1.4 million as of today because the outstanding IRA balance is recorded as a receivable. Our loan loss provisions will not be impacted by future collections of this receivable.

Our non-performing assets to total asset ratio of 50 basis points this quarter, up slightly from the 48 basis points in the third quarter of 2019. The majority of our non-performers are single-family mortgages with loan-to-values at or below 60%. We do not anticipate that these loans

Unidentified Speaker -- EVP & CFO

which will result in any loss to the bank. Stockholders equity increased by $112.5 million to $1,073 as of June 30, 2019, compared to $960 million as of June 30, 2018. The increase was primarily the result of our net income for the 12 months ended June 30, 2019 of $155 million.

The bank is very well positioned from a capital perspective, the tier 1 capital was 8.75% for the Holding Company and 9.21% for the bank as of June 30 2019. We deployed approximately $103 million of our excess capital to fund acquisitions and $56.7 million to buyback our common shares in the 12 months ended June 30, 2019. We have approximately $8 million remaining in our buyback authorization.

With that, I will turn the call over to Johnny Lai.

Johnny Lai -- VP, Corporate Development & IR

Thanks Andy. Operator, we're ready to take questions.

Questions and Answers:

Operator

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Brad Berning with Craig Hallum. Please proceed.

Bradley Berning -- Craig-Hallum Capital -- Senior Research Analyst -

Good afternoon, guys, congrats on the progress. Wanted to talk a little bit further in regards to the balance sheet restructuring on the deposit side. And I was wondering if you could talk through a couple of more details on that. Start with what is the period and net interest margin look like versus the quarter average, given it looks like period end balances that's some pretty major restructurings versus the average balances during the course of the quarter given loan to deposit ratios, how much CDs were down and how much federal home loan banks were down? Can you talk about where that's at? And then talk about the progress of how you expect the rest of the restructuring to take course over the remainder of the calendar year here?

Andrew Micheletti -- EVP & CFO

Yeah, I think in Greg's prepared remarks, he kind of summarized what our broad thoughts are and that generally, we expect to maintain our NIM in that 380 to 4% going forward. So with that, he also highlighted kind of some of the repricing we have, so some of our C&I loans [Indecipherable] price if we have a -- if we have a 25 basis point of work tomorrow or actually on Friday, sorry. So we're looking at that as a small tailwind. First is the ability to reduce our deposit rates and our lending rates going forward. So right now, where I would estimate that we're in a pretty good equilibrium whether to that 3.87% to 3.8% range. And as we would go forward we would look to both reduced deposit rates commensurate with any reduction in the lower rates. And we also do have off balance sheet deposits and significant off balance sheet deposits still from Axos Clearing as well as from Axos fiduciary services as well.

So that will be, that will be a benefit associated. With that, obviously in each case you're trading off fee income for deposit benefits and lower $9 lower interest expense. But those are out there as well with respect to thinking about how NIM will evolve in the future. But one benchmark would be our bankruptcy fiduciary services worried about $550 million at the end of June 30. So as you know that grand total is closer to $900 million. So we've got a ways to go on that product. So we'll get something of a lift as that continues to grow, but I think our summary is exactly that.

Bradley Berning -- Craig-Hallum Capital -- Senior Research Analyst -

It's just a quick follow-up. Would it be safe to assume given the average deposit mix versus the period end deposit mixes that we see that you're starting the quarter at a higher point on the NIM?

Gregory Garrabrants -- - President, CEO & Director

I know. Well, I think, I think that there early has been it reduction in LIBOR that has flowed through prior to the rate cut. So I think, I don't think that's a great assumption because we remember that, and I know you know, I mean obviously the benchmarks are different. So that's something to this lend through.

Bradley Berning -- Craig-Hallum Capital -- Senior Research Analyst -

yeah, understood. Okay, that's very helpful. Much appreciated.

Operator

Thank you. Our next question comes from the line of Andrew Liesch with Sandler O'Neill. Please proceed.

Andrew Liesch

Hey guys, how is it going?

Andrew Micheletti -- EVP & CFO

Good. Hey Andrew, how are you?

Andrew Liesch

Hi, so good things. I noticed the warehouse loan lines were up $113 million or so. And presumably every year those eventually end up paying off, and I mean those payoffs do then serve as a headwind to loan growth later on. So, I guess with that headwind later on in this calendar year, I mean, what gives you confidence that you'll be able to continue to reach that low teens annualized loan growth ?

Andrew Micheletti -- EVP & CFO

Well with respect to the warehouse lines, I think remember, those are primarily government warehouse lines to independent mortgage bankers. So if rates continue to decline, we would expect those balances to go up. So, if you're looking forward and have been a very long period to another rate cycle, then you always have to think through that. But frankly, the demand and that business is very high and the pipeline in that business is very good. So I think when we look, and we're forecasting what we have from a loan pipeline perspective that's how we are getting to those estimates.

Now that being said, prepayments are high and competition is high. So there is obviously always the potential that we don't reach that objective, but we think we have a reasonably good shot at it. And I don't believe that the warehouse, the agency warehouse business will be a decrement from that loan growth, I think it will be a net contributor, particularly given the rate environment that at least it appears that we're entering into.

Andrew Liesch

Okay, thanks. That's really helpful. But on the broker dealer fees here in the quarter that the $6.7 million, is that a good number to model off going forward? This is the first full quarter with that revenue stream. So just curious if that's what we should be using?

Andrew Micheletti -- EVP & CFO

Yes, we would use that number.

Andrew Liesch

Okay. I just think I'll step back. Thanks, you covered my other question.

Andrew Micheletti -- EVP & CFO

Thank you.

Operator

Thank you. Our next question comes from the line of Michael Perito with KBW. Please proceed.

Michael Perito -- KBW -- Analyst

Hey, good afternoon. [Multiple Speakers] Just on the mortgage banking gain on sale, it obviously had a nice quarter. I imagine the rate in environment got a support of them. Is that kind of two fold question here, Can you talk about kind of the sources of that origination activity? And how you expect that trend moving forward now. Should we enter kind of percentage rate outlook? And also, secondly with the margins, a gain on sale margins were like, and whether do you think there is some good market conditions for those types of rates to be sustained?

Andrew Micheletti -- EVP & CFO

Yes. So total originations for the quarter were $102 million producing a net gain of $2.3 million. So quick math, it's a 2.3 margin. However, we do have adjustments, for example the MSR adjustment is in there and the one negative about rates coming down is that you take a small coupon your MSR. So -- but at $100 million in originations and $2.3 million of gain, you have a rough estimate.

Gregory Garrabrants -- - President, CEO & Director

I think that -- so with respect to where they're coming from, we have, that's -- it's a -- it is a marketing driven and data driven process to bring those loans to us, but we think the marketing cost has trended in a very strong way and a good way for us.

We continue to cross sell mortgages to an ever-increasing group of customers. We've had some decent success with the nationwide marketing and that's just getting started. So I think -- I think that obviously the rate environment helps. So I think that should be a positive coming into the next year, hopefully

Michael Perito -- KBW -- Analyst

Got it. Thank you. And then on the expense side with fiscal 2019 kind of in the books here and as you look out and I imagine, this will be a topic discussed at your Investor Day in October. But just the -- I was wondering if you could maybe just repeat or remind us kind of your thoughts on overall efficiencies for fiscal 2020, but also more broadly what some of the more meaningful investments you think that are going to be completed next year and kind of just, I know it's kind of a broad question. But why you think they are so critical and what type of revenue opportunities you think they should drive long-term, it would be just great to get an update? Thanks.

Gregory Garrabrants -- - President, CEO & Director

Sure, no problem. So let's talk about Axos clearing first. So the platform that we've built the universal digital banking platform, we call it a banking platform, but it really is a very flexible platform that can be utilized to add the securities information and services inside that platform. So the first opportunity that we have is with the more than 100,000 high net worth customers that clear through COR, those independent broker-dealers are starving for an integrated solution, and a portal for their clients.

So over the next year, we will create that portal and deploy that portal to those clients, those clients will then benefit from Axos banking services. But what they'll also -- but the broker dealers will also benefit from the fact that they're providing these services to their clients and those clients aren't seeking those banking services elsewhere to more integrated banks. So, first and foremost, we have a fantastic group of clients, high net worth individuals that are serviced through these independent broker-dealers that need that service, they also need a great account opening platform. The good news is we have a great one on the banking side, it needs to be modified for the securities business. But those two things alone are very exciting to drive independent broker-dealers to the Axos platform and we've had several nice wins with respect to firms that are switching from firms that just have a cater to those technology needs. So the smaller IVDs are very, very focused on how they can get technology to those end customers. So that's a big part of that and it's a great source of client acquisition as well. In fact, over the last several months since we bought COR. We added 8,000 high net worth clients from two broker dealers --that transition and signed up to Axos Clearing.

So that's one set of investments. The next and that's called maybe called out the intermediated sort of channel. The next channel an opportunity is that if you've noticed and I'm sure you have, if you see whether Robin Hood applying for a bank charter or all these different Robo-advisory firms offering banking products, what you're seeing is the recognition that the customer acquisition costs associated with these acquisitions and the services that these customers are seeking requires that digital of focused banks have our investment advisory services and embedded in their platforms.

So that success the Schwab's had and others that have had with respect to that in the direction that you clearly see in the industry is something that we can accomplish and do it in an extremely cost effective way because we own the entire value chain, right? If you don't own a clearing company, you're not going to be able to offer this type of trading services that we can offer or the type of investment and advisory services at the cost that we can offer iIf that customer ends up banking with us. So the reality behind this, is that the competitive offering of the future with respect to this is much more integrated. So, that's the next that's the other component of that. Now they're all derivatives of the same platform investment, but they all have specific elements that has to be developed. So that's really the core of what that looks like, so then if you flip forward a year, what you have is you have a consumer platform that has those services available to their customers and is attracting customers from a customer acquisition cost perspective through a free Robo advisory platform. If somebody is banking with us and and that those are incredibly sticky clients and then you have in the intermediated basis, you have a competitive differentiation in order to attract customers to Axos clearing, so that's the idea.

Michael Perito -- KBW -- Analyst

Helpful. And then just, sorry, just I'm sure you guys mentioned it, but I jumped on the call couple of minutes late, but just the efficiency ratio. Do you guys have any initial thoughts on fiscal 2020 if you don't mind repeating it if you mentioned already? Thank you so much guys.

Andrew Micheletti -- EVP & CFO

I think, I think that having a -- that looking at a full-year banking efficiency ratio where we were in that below 40 range is a reasonable modeling measure for you as banking segment. And then the security segments we guided into that high 80s, low 90 range for the entire fiscal year given the investment that needs to be made there. And obviously we don't expect it to stay there over the long-term, but this is a longer-term strategy and so we need to ensure that we're investing there appropriately to accomplish some fairly critical objectives.

Michael Perito -- KBW -- Analyst

Thank you.

Operator

Thank you. Our next question comes from the line of Scott Valentin with Compass Point Research. Please proceed

Scott Valentin -- Compass Point Research & Trading

Good afternoon, thanks for taking my question. Just with regard to the C&I portfolio, I was wondering how much of that is coming from sponsors, is most of that still coming from sponsored transaction, just wondering what the environment is that we're hearing more and more competition in that space with regard to covenants and other items?.

Andrew Micheletti -- EVP & CFO

Well, so most of it is coming from sponsors, but we are not participating in the cash flow that the cash flow side of that business, so the typical leverage lending business sponsor back leverage lending business, we don't do that business at all or let's say I shouldn't say at all and maybe there is a couple of very small pieces of transactions, but that's not the business. So yeah, we don't, we are, we definitely, there is no loosening of standards, loosening of covenants, loosening of collateral protection there with respect to what we have and So yeah, I don't -- I don't, I think that's a different animal.

Scott Valentin -- Compass Point Research & Trading

Okay. And then just -- I understood you have some New York City commercial real estate, any impact from a change in the housing loans there?

Andrew Micheletti -- EVP & CFO

Not really. I think that's the reality of our portfolio that we had, we have some low LTV, permanent multifamily loans there. But we were never really competitive in that market because it was a -- the rent control laws resulted in most of the big competitors having an 80% loan-to-value and doing non-recourse transactions. And we were -- we are very low LTV shops, so we were never able to really compete there. It's sort of interesting because you do see some of the New York competitors backing off on their concentrations now with respect to that market a little bit because I think there is a little bit of consternation. But it's not particularly impactful on us. It's kind of interesting because obviously, what it should do is it should shift. We'll have a lot of impacts, but one of the impacts of the lab is it will shift development toward newer development right, which would not be constrained by some prior -- some prior set of contractual relationships, which are now going to be binding on the future and that interesting way that was passed.

Scott Valentin -- Compass Point Research & Trading

Okay. And then just one final question on, you mentioned your capital management, you guys are generating excess capital, in terms of M&A opportunities. I understand you guys -- you're working on integrating in building products, but just wondering, would you be able to take advantage of any M&A opportunities that come your way?

Andrew Micheletti -- EVP & CFO

Yeah, I think, certainly that's something we're always looking at and we have a fairly narrow focus with respect to what we're interested in doing from an M&A perspective. I think we are reasonably well set up strategically to do what we need to do. And I don't foresee a need to do something more right now.

However, there are components of the securities business that might be interesting as bolt-ons or things like that and we would certainly be able to look at those. But yeah, I mean that obviously depends on the size, it depends on a lot of things with respect to, it depends on the currency you utilize those sort of things. But we're certainly not limiting ourselves with respect to what we look at.

Scott Valentin -- Compass Point Research & Trading

Okay, all right, thanks for taking my questions.

Andrew Micheletti -- EVP & CFO

Sure. Thank you.

Operator

Thank you. Our next question comes from the line of Edward Hemmelgarn with Shaker Investments. Please proceed

Edward Hemmelgarn -- Shaker Investments

Yeah, Greg, just one question or well actually two. When if you look at your all the investments that you're making, which appear to be good. When would you expect to move more from the investment phase, I mean what you're doing now to more where we start seeing more of a harvesting or improvement in margins? How do you think that --?

Andrew Micheletti -- EVP & CFO

Well, I think the reality with respect to things like the tons what you're talking about, right? If you're thinking about, let's say, the Axos fiduciary services investments. The reality is, is that a lot of banks with a primarily fixed-rate loan portfolio saw their margins have a significant negative impact associated with them, right?

So if someone would come back and said, years ago that we were asset sensitive, I think that would have -- people would have been skeptical of that given the fact that we have such great downside protection in rates in the way we structure our lending book, which is primarily a fixed rate book. So I think that you are seeing those benefits with respect to loan and margin rates in a lot of the things that we're doing, because we are competing in an online savings environment that has big competitors, like Goldman Sachs offering to 280 rates. So I think that's very important to understand that you are seeing those benefits already. In the fact that we've been able to diversify the loan book in a significant way and we've been able to increase margins with a 75% fixed-rate loan book in a flat yield curve environment, right?

I mean if you step back, I mean it's always, it's always difficult to do because obviously the answer is, I want more, but that's one answer. So then so that's with respect to those things. The next answer is that with respect to the new developments with respect to what we're looking to do on the consumer banking platform inside. And I'll tell you that those benefits, continue to generate incremental improvement in lots of different ways and they offset lots of other costs that otherwise would accrue going over $10 billion doing all these other things.

So for example we digitized at least from a customer perspective almost all the interactions that customers have with us for wires for beneficiary changes at all those elements within inside the platform in the last quarter since it was launched, that provides the customers are much better user experience, it should result in retention all these other sort of things. We still have some work to do to get the straight through processing done -- through the operational side of that business. And that will result in better scaling efficiency as we grow on that side of the house. So by having these interactions platforms setup, what you do see as you do see that you can scale without having to have a commensurate and proportionate increase in selected operational personnel because you're digitizing those things. So that's an important benefit and that benefit is going to be realized progressively overtime in a methodical manner because it's not one thing, there is 3,500 process diagrams at this bank, right? So, every one of those processes, you can look at with respect to this and you can work through how those operational advantages accrue.

Of course the other element is that offering services to new and existing clients with respect to the Axos invest side, it allows you to have a contest for customer acquisition cost between digital acquisition of checking account customers and digital acquisition of Axos invest customers, and then you're looking at what those cross sells are and you're looking and you're saying, which is the best way to scale that customer base. Is it better to advertise a Axos invest platform and then get a 20% to 30% that's by way of example cross sell with respect to a larger banking relationship or to go from banking and reverse.

And the reality of that is we have our models and hypotheses and we have prior data on what WiseBanyan was able to do from acquisition cost perspective, but we don't know ,and we're not going to know that either until we actually complete the service offering, and then we go out in the market and we test that. And when we do that, the market is going to have changed itself because you're having lots of these FinTech [Phonetic] companies looking at banking charters or trying to figure out how to offer more comprehensive services because they're recognizing the same issue that we are, which is that customer acquisition cost in a digital environment needs to be amortized over the appropriate product set.

So, like all of these things, I think unfortunately, I'd love to give you a simple answer, but that would -- that wouldn't be, it wouldn't be accurate.

Edward Hemmelgarn -- Shaker Investments

I guess another way to think about it is, two questions, when would you expect to see -- start seeing margins in the securities business improving?

Gregory Garrabrants -- - President, CEO & Director

I think we'll see gradual -- I think we'll see -- we'll definitely see improvements in that business in fiscal year 2020, but you will see gradual improvements in it. Let us put it this way, they are all already and we're already seeing improvements in that business in a number of ways, one is that the credibility of the firm broadly is bringing in clients, we are been able to streamline operations there, we have lots of initiatives and ability to make the businesses more efficient.

However, we will also be investing that money all of it in more in improving that business such that it is legitimate competitor to purging and to national and those sorts of things or Fidelity's national.

So what you're going to see is, there are improvements happening, but those funds are going to go to getting better personnel. We just hired a head of ops from one of the big three guys is the head of ops for that whole place. And so we're upgrading the team. We're investing in technology, we're investing in their systems and processes. We're investing in risk, we're doing all that stuff. And so that's going to offset what we're doing.

But then when you're looking into that 2020 period, what you're having as you're actually having an incredible source of customer acquisition and also an amazing source of very stable cash balances that arise from this. You can look at other competitors that have done this and it's been an incredibly successful strategy with respect to gathering low cost deposits that have strong longevity.

Edward Hemmelgarn -- Shaker Investments

Certainly, I mean I don't disagree with the strategy. I was just trying to think about it is, like is it going to be like 2021 type frame where you really start to see that driving improved results for the tax as a whole?

Gregory Garrabrants -- - President, CEO & Director

Yeah, I think that this year with respect to the securities business is -- you should focus on investing. And as I think they're coming into that June time frame of next year that there definitely will be -- it will be set to go with respect to what we're doing there.

Edward Hemmelgarn -- Shaker Investments

Okay. And then lastly, just one more question. If you now that you've had the universe or the digital banking platform up and running for a quarter, is there, can you give any examples of something that you're doing right now, I mean a success that you've had that you couldn't have had in the past?

Gregory Garrabrants -- - President, CEO & Director

Yes, I can give you many, many examples. Well, the first and foremost example was that we were able to take the nationwide customers all on and create specific profiles with respect to the way they wanted to treat certain risk segments of their customers, they both had a very high-end customer segment and they had some other customer segments that needed to have a variety of different limits and a variety of different risk parameters and we were able to customize those.

The next thing we were able to do is go through every customer interaction, every facts that comes into the bank, every wire form, every one of those elements and we were able to create digitized interactions in the platform, so that customers now have a seamless experience and they don't have to interact with the the bank telephonically or through fax with respect to any service that they need or any account maintenance opportunity. Another was that we were able to integrate a driver's license capture and liveness photo capture match to be able to reduce fraud and to increase the quality of CIP within the platform, so it's a better user experience because of the speed at which it auto fills everything and also it allows us to have great way of identifying someone, and when someone because obviously there has been a lot of identity compromises overtime, so the quality of credit data with respect to being able to make risk-based decisions.

Let's say on the credit data that's reported through different types of questions is declined overtime is that credit data has become more widely available to bad guys. So our ability to enhance security is another example of that. Another one was that if you have a new -- if you had, if you have an existing account, well let's say you have a savings account and you want to open a checking account because a checking account is a credit product previously you'd have to go out and restart an application its entirety, now you can go through that process internally online and gather an addition -- open an additional account and go through that additional process inside the platform rather than having to go outside the platform and it seamlessly does all that work for you. So those are the types of things that are happening every day to improve the process and we have complete control over it now. So as we go through, we have an interactions task force And that interactions task force looks at every contact that happens in the institution, why is someone calling the servicing group, they're asking for a pay-off statement, they're asking for a loan balance or whatever those things are or to pay to make a certain kind of payment, all of that data is being analyzed, then push through the development queue to enable a better customer experience. It's more secure, because they're coming through the secure platform and then they're also able to self service more in a way that enhances customer satisfaction and over the long-term results in operating scale. So I mean those are just some of the things you've got the interaction side of it, which reduces operating cost, then you've got the new product side of it, which allows us to incorporate other elements into the platform, the security side then utilize that platform for end clients on the consumer end intermediated basis.

Edward Hemmelgarn -- Shaker Investments

Okay, thanks.

Andrew Micheletti -- EVP & CFO

Sure.

Operator

Thank you. Our next question comes from the line of Steve Moss with B. Riley, FBR. Please proceed.

Nicholas Duafala -- B. Riley FBR

Good afternoon, this is actually Nick Duafala stepping in for Steve Moss

Andrew Micheletti -- EVP & CFO

Hi Nick

Gregory Garrabrants -- - President, CEO & Director

Hey Nick

Nicholas Duafala -- B. Riley FBR

Hey, so you mentioned in your prepared remarks that jumbo single-family originations rebounded last quarter. So just wondering what the rate you're seeing for these mortgages today and also how overall new loan origination rates compared to existing portfolio run off rates?

Gregory Garrabrants -- - President, CEO & Director

Sure. So, I think that they're -- with respect to the question -- they basically will say mid to lower five is roughly where they are. And I would say that they're relatively consistent with respect to run-offs and others. But we do, I think obviously with what's happening in the rate environment that we're going to have to be looking carefully at that end, whether or not we will need to be looking at some of the fixed rate lending products and what rates were charging based on market competition. We think the answer to that is yes.

Now we have run our models forecasting what we will need to do from a rate reduction perspective if market rates go down, and we are forecasting that we will have to reduce rates there and we're still getting to that NIM guidance. So that's, you know, that's obviously in an environment where we're going to be looking at what happens from a competitive standpoint, but we're going to have to react to it to some extent. I'm sure.

Nicholas Duafala -- B. Riley FBR

OK, that's helpful. And Could you give us some flavor of the beta on interest bearing deposits if we were to see 50 basis point cuts by year-end?

Gregory Garrabrants -- - President, CEO & Director

That question is very dependent upon what type of deposits we're talking about. And so with the way that we have provided guidance with respect to that is giving you some guidance with respect to the repricing of loans and then giving your margin guidance. I think with respect to that implies a deposit beta. But the reality of this is the reason why I'm not giving you that is because it's complicated because we have current off balance sheet deposits that are very low cost both in clearing and to AFS [Phonetic] that can come on balance sheet depending upon what we see from a growth perspective in our different units.

We also have great pipelines for deposits in some of the commercial businesses how those come to fruition and the timing of them are quite influential. So all of those together, we've looked at it, we've modeled those out and come up with the conclusions that we've provided to you.

Nicholas Duafala -- B. Riley FBR

Okay, makes sense. Thanks guys.

Gregory Garrabrants -- - President, CEO & Director

Sure.

Operator

Thank you. Our next question comes from the line of Gary Tenner with D.A. Davidson. Please proceed.

Gary Tenner -- D.A. Davidson

Thanks. Actually my questions were asked and answered. I appreciate it.

Andrew Micheletti -- EVP & CFO

Thanks, Gary.

Gregory Garrabrants -- - President, CEO & Director

Thank you.

Operator

Thank you. We are obviously end of our question-and-answer session. Allow me to hand the floor back over for closing remarks.

Gregory Garrabrants -- - President, CEO & Director

Thank you everyone for your interest in Axos Financial. And we'll talk to you next quarter. Have a good rest of the day.

Operator

[Operator Closing Remarks]

Duration: 72 minutes

Call participants:

Johnny Lai -- VP, Corporate Development & IR

Gregory Garrabrants -- - President, CEO & Director

Andrew Micheletti -- EVP & CFO

Unidentified Speaker

Bradley Berning -- Craig-Hallum Capital -- Senior Research Analyst -

Andrew Liesch

Michael Perito -- KBW -- Analyst

Scott Valentin -- Compass Point Research & Trading

Edward Hemmelgarn -- Shaker Investments

Nicholas Duafala -- B. Riley FBR

Gary Tenner -- D.A. Davidson

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