Q3 2024 Axos Financial Inc Earnings Call

Participants

Johnny Lai; Senior Vice President, Corporate Development, and Investor Relations; Axos Financial Inc

Gregory Garrabrants; President, Chief Executive Officer; Axos Financial Inc

Derrick Walsh; Chief Financial Officer, Executive Vice President; Axos Financial Inc

Eric Spector; Analyst; Raymond James

Andrew Liesch; Analyst; Piper Sandler

Kelly Motta; Analyst; Keefe, Bruyette & Woods

Edward Hemmelgarn; Analyst; Shaker Investments

Gary Tenner; Analyst; DA Davidson

Presentation

Operator

Hello, and welcome to the Axos Financial Inc's third quarter 2024 earnings call and webcast. (Operator Instructions)
As a reminder, this conference is being recorded.
It's now my pleasure to turn the call over to Johnny Lai, Senior Vice President, Corporate Development and Investor Relations. Please go ahead, Johnny.

Johnny Lai

Thanks, Kevin. Good afternoon, everyone, and thanks for your interest in Axos. Joining us today for Axos Financial Inc.'s third-quarter 2024 financial results conference call are the company's President and Chief Executive Officer, Greg Garrabrants; and Executive Vice President and Chief Financial Officer, Derrick Walsh.
Greg and Eric will review and comment on the financial and operational results for the three and nine months ended March 31, 2024, and we will be available to answer questions after the prepared remarks.
Before we 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. Please refer to the Safe Harbor statement found in today's earnings press release and 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 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 the call over to Greg, I'd like to remind listeners that in addition to the earnings press release and 10-Q, we also issued an earnings supplement for this call. All of these documents can be found on the Axos Financial website.
With that, I would like to turn the call over to Greg.

Gregory Garrabrants

Thank you, John, and good afternoon, everyone, and thank you for joining us. I'd like to welcome everyone to access Financials Conference Call for the third quarter of Fiscal 2024 ended March 31, 2020 for I thank you for your interest in Axos Financial. We delivered outstanding results, generating double digit year-over-year growth in earnings per share, book value per share and ending loan balances for a seventh consecutive quarter. Balanced organic loan and deposit growth, coupled with further net interest margin expansion resulted in double digit net interest income growth year over year and linked quarter annualized. We grew deposits by approximately $900 million linked quarter, outpacing our ending net loan growth by approximately $430 million. Strong loan originations were partially offset by higher payoffs. We reported net income of $111 million and diluted earnings per share of $1.91 for the three months ended March 31, 2024, representing year-over-year growth of 38.7% and 45% respectively. And our tangible book value per share was $35.46 at March 31, 2024, up 27% from March 31, 2023. Other highlights this quarter include the following ending loans for investment net of allowance for credit losses were $18.7 billion, up 2.6% linked quarter or 10.4%. Annualized growth was broad-based with growth in non-real estate lender finance, single-family warehouse and fund finance, offsetting lower origination volumes in single-family jumbo mortgages, higher payoffs in commercial specialty real estate, multi-family and deliberate runoff in our auto book, net interest margin was 4.87% for the first quarter ended March 31, 2024, up 32 basis points from 4.55% in the quarter ended December 31st, 2023 and up 45 basis points from 4.42% in the quarter ended March 31, 2023, when loan acquired from the FDIC paid off this quarter, boosting our net interest margin by approximately three basis points. Excluding the one-time gain associated with the FEIC. loan purchase last quarter, noninterest income was up 4.5% from Q2 to Q3 due to higher mortgage banking income and prepayment fees. Our credit quality remains strong with net annualized charge-offs to average loans of seven basis points in the three months ended March 31, 2024, seven basis points of net charge-offs this quarter includes four basis points of net charge-offs from auto loans covered by insurance policies with proceeds from those policies accounted for as fee income. We continue to generate strong returns with a 20.71% average return on equity and a 1.98 return on average assets in the three months ended March 31, 2024, we had balanced loan originations in our commercial and industrial non-real estate lending including asset-based lending, non-real estate, lender finance and fund finance balances, ending balances for our small balance, commercial real estate and commercial real estate specialty lending businesses declined by approximately $19 million and $180 million, respectively in the third quarter. We continue to reduce our consumer and auto loan balances, given our preference for originating and retaining loans with lower duration floating rates and a better just a risk-adjusted return in the current environment.
Our average loan yield for the three months ended March 31, 2024 was 8.65%, up 47 basis points from 8.18% in the prior quarter and up 158 basis points from the corresponding period a year ago. Average loan yields for non-purchased loans were 8.19% and average yields for purchase loans were 17.05%, which includes the accretion of our purchase price discount. New loan interest rates were the following. Single-family mortgages, 8.7%, multifamily, 8.3%, C&I, 9.2%, and auto 10.2% our commercial real estate loans continue to perform well. It's worthwhile to point out that the structure, duration and exit strategies for our commercial specialty real estate loans are significantly different from traditional CRE term loans than most other banks are originating a low loan to value and senior structure. We have in place for an overwhelming majority of our commercial specialty real estate loans provides us with significant downside protection in the event of a significant deterioration in the borrower's ability or willingness to repay the valuation of the underlying properties or any construction delays our commercial real estate loans are floating rate with contractual maturities generally between two and three years compared to fixed rate loans have contractual maturities of seven or longer years for most commercial real estate loans of the $5.2 billion of commercial specialty real estate loans outstanding at March 31, 2020 for multifamily was the largest segment, representing 38% of total commercial real estate loans, while hotel office and retail represented 28% and 4% respectively. On a consolidated basis, the weighted average loan-to-value ratio of our commercial real estate portfolio is 40%. Our retail and office segments of our commercial real estate book are well secured with weighted average LTVs of 46% and 36%, respectively. Total commercial real estate loans secured by office properties declined by $8 million linked quarter to $410 million. Of the $410 million, commercial real estate loans secured by office properties. At the end of the quarter, 67% are A. notes or node on node structures. All have significant subordination without having recourse to funds as cost collateralization with other asset types of fund partners and mezzanine lenders. These loans have an average loan to value of 37%, excluding any recourse or cross collateralization. Nonperforming loans in our commercial specialty real estate portfolio were approximately $26 million at March 31, 2024, identical to the 1230 first, 2023 ending balance representing less than four basis points of our total commercial real estate loans outstanding. There are two loans, one condo building in New York for $15 million in the student housing building and Berkeley for $11 million, which make us the nonperforming loan totals for commercial specialty real estate. We did not anticipate occurring incurring a material loss on it on either of these loans.
Nonperforming loans in our multifamily and commercial mortgage portfolio were approximately $38 million at March 31, 2024, roughly consistent with the December balance of the $38 million. There was one loan out of assisted living property for $25 million that has been reserved for more than a year. There is interest in that property that could result in the sale, which would produce minimal or no additional loss. The rest of the multifamily term loans are first lower balance properties located in California with recourse and personal guarantees, the average loan-to-value of our nonperforming multi-family and commercial mortgages approximately 60%. We do not expect to incur a material loss in any of the other multifamily loans categorized as nonperforming. We closed the purchase of two loan portfolios with a UPB of $1.25 billion from the FDIC in December of 2023. Ending balances were roughly flat declining by approximately $10 million from the December quarter end to the March quarter end, all loans purchased from the FDIC are current nonperforming single-family mortgage loans decreased from $54 million at December 31st, 2023 to $51 million at March 31, 2020. The weighted average loan-to-value of our nonperforming single-family mortgage portfolio was 55% at March 31, 2024. Given that home values continue to increase in the majority of markets where these properties are located, we did not foresee much loss content. If any in our delinquent single-family mortgages, we increased deposits by $900 million or 20% annualized in the third quarter. Checking and savings accounts representing 80% of total deposits at March 31, 2024 grew even faster at 25% annualized. Our deposits remain well diversified from a business perspective. With consumer and small business, 59% of total deposits, commercial cash, treasury management and institutional, representing 24% commercial specialty representing 7% access fiduciary services representing 6% and access securities, which is our custody and clearing business representing 4%. Total non-interest bearing deposits were approximately $2.8 billion, relatively flat quarter to quarter. Our balance sheet remains slightly asset-sensitive, given the shorter duration variable nature of our loans and the granularity and diversity of our consumer commercial securities deposits. At March 31, 2024, approximately 66% of our loans were floating 27% were hybrid ARMs and 7% were fixed term deposits for only 5% of our total deposits at quarter end, providing us flexibility to decrease interest costs if and when rates decline for the quarter ended March 31, 2024, our consolidated net interest margin was 4.87%, while our banking business net interest margin was 4.92%. Our consolidated and banking business names remain above our guidance of 4.25% to 4.35% despite holding excess liquidity due to strong deposit growth. We indicated last quarter that the FDIC. loan purchase would boost our net interest margin by 35 to 45 basis points for the next several years. In addition to the amortization of our purchase discount for the acquired loan portfolio, we recognized accelerated purchase discount accretion on one loan that paid off this quarter. The timing and amount of loan payoffs are unpredictable. We break out the average balances and loan yields for the purchase or not purchase loans in our 10 Q for readers to separate the impact of the loan purchase on net interest margin. Total ending deposit balances at access advisory services, including those on and off accesses balance sheet, declined by $32 million in the quarter, reflecting advisors, investing excess cash into risk assets and higher yielding cash alternatives. The rate of decline has decelerated, and we believe that the pace of cash sorting and access advisory services stabilized at or near the bottom, representing 3.6% of assets under custody at March 31, 2024, compared to the historic range of 6% to 7%. We are focused on adding new assets from existing and new advisors to grow our assets under custody and cash balances. In addition to our excess securities deposits on our balance sheet, we had approximately $500 million of deposits off balance sheet of partner banks and another $700 million of deposits held at other banks by software clients and Zenith accounting and business management vertical. Noninterest expenses increased $11.3 million linked quarter, driven by a seasonal increase in payroll expenses, higher FDIC insurance expenses and an increase in headcount. We have successfully onboarded several new leaders and teams in our commercial deposits, commercial lending and our access securities businesses. We believe these additions will help us grow and diversify our business from an operations capacity and product perspective. While we continue to evaluate adding talented individuals to our team, we expect the pace of hiring to slow significantly from the pace we've experienced so far year to date, our focused investments in front end back end systems, product features and service offerings and other enterprise software and systems will further optimize our processes and capabilities. We started the initial transition of our small business banking platform to our Universal Digital Bank with a goal of migrating all existing small business deposit customers to UBB in the next few quarters. This platform transition will leverage the investment we have made UDB and make our small business banking offering more modern and user-friendly. We started piloting our white-label banking with selected members of our eyes and introducing broker dealers. While the initial version does not have all the capabilities in an access consumer deposit customer has today, we believe the ability to provide a turnkey banking solution to the hundreds of thousands of affluent clients of our custody and clearing business will provide another potential low-cost acquisition channel for deposits and loans. Axos Clearing, which includes our correspondent clearing and RIA custody business continues to make steady progress. Total deposits at Axos Clearing were $1.3 billion at March 31, 2024, down only slightly from $1.4 billion at December 2023 of the $1.3 billion of deposits from Axos Clearing approximately $762 million on our balance sheet and $533 million, the partner base. The decline in our off balance sheet deposits is the primary reason for the sequential decline in non-interest income for excess securities. Total assets under custody were $35 billion at March 31, 2024, up from $34.4 billion at December 31st, 2023. The pipeline for new custody clients remains healthy, comprised of 237 advisory firms with approximately $24 billion of combined assets under cost. We are proud top prioritizing various front and back end upgrades to our technology platform tracks those advisory services. We believe the addition of new features and functionalities will improve our operating efficiency, scalability and potentially expand the type of advisors we're able to service. This is a multiyear initiative that will be implemented in stages with a majority of the costs being offset by ongoing efficiency initiatives and additional reps to continue to outperform a majority of our peers from a loan deposit, an earnings growth perspective, including margin and profitability, we remain well positioned to maintain our outperformance given our strong liquidity and excess capital, a diminimus unrealized loss in our small investment securities portfolio, our multiyear boost in earnings and margin from our FDIC loan purchase and solid organic growth prospects given the diverse nature of our banking and securities business. Our asset base lending philosophy with conservative loan to values and prudent structures makes us confident that we'll be able to manage our credit through the cycle. While many uncertainties exist with respect to the economy, inflation, interest rates and geopolitics, we are focused on managing our risk and investing in our future. We have a proven track record of capitalizing on market dislocations. As we've already demonstrated with our FDIC. loan purchase and stock buybacks, we're confident the investments we are making in Business Systems process and people will generate attractive future returns for our shareholders.
Now I'll turn the call over to Derrick, who'll provide additional details on our financial results.

Derrick Walsh

Thanks, Greg. To begin, I'd like to highlight that in addition to our press release and eight K with supplemental schedules and our 10 Q were filed with the SEC today and are available online through EDGAR or through our website at Axos Financial.com. I will provide some brief comments on a few topics. Please refer to our press release and our SEC filings for additional details following a strong start to the first nine months of our fiscal year. Our loan growth outlook is consistent with what we have guided to in recent quarters. We believe that we will be able to grow loan balances organically by high single digits to low 10s year-over-year for the next few quarters, excluding the impact of the FDIC. loan purchase or any other potential loan or asset acquisition. Our ending loan balances will continue to be impacted by the pace and timing of payoffs in any given quarter demand in our ABL lender, finance and capital call lines and select C&I lending categories remained solid while higher interest rates continue to put downward pressure on our origination volumes in jumbo single-family mortgage multifamily, small balance, commercial real estate, auto and personal unsecured lending. Our as our loan pipeline remains solid at $1.7 billion as of April 26th, 2024 consisting of $226 million of SFR jumbo mortgage, $53 million of SFR gain on sale mortgage, $17 million of multi-family and small balance commercial $23 million of auto and consumer and $1.4 billion of C&I lending. Our provision for credit losses was $6 million in the three months ended March 31, 2024 compared to 5.5 million in the corresponding period a year ago. Our allowance of credit losses to total loans held for investment was 1.36% compared to 1.01% at March 31, 2023. We remain well reserved relative to our historical and current credit loss rates.
Lastly, our income tax rate was 28.8% for the third quarter ended March 31, 2024, slightly below the lower end of our guided range of 29% to 30%. Our tax rate in the third quarter benefited from the recognition of certain tax credits. We expect our annual tax rate to remain in the 29% to 30% range for the remainder of calendar 2024.
With that, I'll turn the call back over to Johnny.

Johnny Lai

Thank you, Eric. Kevin, we are ready to take questions.

Question and Answer Session

Operator

Thank you. And I'll be conducting a question-and-answer session. (Operator Instructions)
Eric Spector, Raymond James.

Eric Spector

It is Derrick on the line for David. Peter, thanks for taking the questions. Just to touch on that has gone up. Just wanted to touch on that on the hiring front to start like you've been active recruiting and talent. Just curious what's the pipeline and appetite for additional hires and where you're focused on ag out. I'm just curious how the pipelines are trending to for the treasury management and capital call team you've recently added.

Gregory Garrabrants

It is a capital call team we're not doing a lot of additional hiring there. There may be additional analysts and those sorts of positions. But right now, we've got a great team. They're doing a great job and so things are pretty stable there.
On the deposit side, we are in the process of recruiting more talent. I would say that it's less from a distant number of people than we've had historically. So we're continuing to look for deposit talent and at sites can be difficult to find. Sometimes we have a particular type of person we're looking for with a particular business max. So but there are folks they're out there. There is a pipeline. I would expect, though, that the the increases that you've seen in personnel expense would be moderating a bit in the next several quarters relative to what they were as far as from an increase perspective, again, I think we talked about maybe that running in line with the loan growth business.

Eric Spector

Is that a good way to think about it? And I think we've got time for one more.
Yes, yes. Yes, that's helpful. And then just curious, I mean maybe on capital and capital priorities. Your capital ratios remain strong and continue to accrete capital at elevated pace. Just given the expanded authorization, how do you expect to be active in buybacks here going forward? Or do you expect kind of to focus on organic growth and take a more opportunistic approach like you did last year with ventures or just kind of curious kind of more broadly how you think about capital.

Gregory Garrabrants

Yes. Well, I think our stock price is still quite low relative to the earnings that we're producing. But we also regularly look at acquisition opportunities. And I still think we have reasonable prospects for loan growth so that we did a very little bit of buyback. I mean, a very little bit this quarter. I just based on some anomalies in the share price that occurred as a result of different exogenous events. But we're ready to be active in the market there. And balance all three of those priorities. And that just depends really on what we see there is there may be loan purchases or loan pools out for acquisition. Certain banks are getting out of certain business lines. Those are opportunities we look at. So it's really difficult to say with respect to how that will work itself out.

Eric Spector

Yes, great. Thanks. Thanks for answering the questions. I'll step back.

Gregory Garrabrants

Thank you.

Derrick Walsh

Thank you.

Operator

Andrew Liesch, Piper Sandler.

Andrew Liesch

Thanks for answering the questions here. I'm just how does the thinking on M&A on, I guess, arguments? And sounds like you're looking at maybe some certain business lines that maybe banks might be getting out of our loan pools, anything Pacific? Anything if you look at your franchise and your products, what you might want to add that you don't currently offer?

Gregory Garrabrants

You know, we have we're always looking for a variety of different opportunities and that includes going across the securities businesses in the banking business.
You know, I think that just this is the type of market that you often see banks start to pare back and businesses are people. And so there has been some different opportunities that arose, whether it was in the insurance premium finance business on the life side, things like that. So there's different areas that we like, and we just remain opportunistic and just may want to make sure we have the capital to do that. So our capital ratios are very strong and give us the opportunity to look at those those types of options that arise in these kind of markets.
Got it. That's helpful there. And then on the margin, obviously, you're coming in well above the guide.

Andrew Liesch

I mean, is there any reason to think that it's going to trend back below your now that you have the full quarter effect of the and the accretion from those loan pools kind of there was a little bit of one-timers in there, but the right, yes, good level to build off of it.

Gregory Garrabrants

It is interesting. I think that that commercial specialty real estate side, I think there's a bit of margin compression there. So I think if we want to and grow that or maintain balances that probably some of the newer loans are going to come on a little and maybe a little more with a reduction in spread from what they've come on before, but I don't think there's a feasible way for us to get back to that guide range. I think that guide range just has to be adjusted for the differential that we discussed with respect to the signature purchase. And that just has to be added onto it for now. I mean and over time, I mean, it'll be an extended period of time years, but that that signature benefit will gradually decline as a percentage of the overall volume. But right now, the pools performing extraordinarily well. There's no delinquencies in the pool that obviously has a long de-rated pool. So it's the behavior on payoffs is generally consistent with what we thought. So the guide range needs to obviously be updated for that increment. And then I think there might be a little margin pressure if we want to grow crestal. But overall, I think we're going to be able to continue our loan growth that at the current kind of organic margins that we have. And then we always have the benefit of some of the hybrid loans running off.

Derrick Walsh

And even if it's only think in the next six months, it was six or 700 million or something, which is $691 million in the next six months.

Gregory Garrabrants

So that's not nothing either. And that obviously helps with respect to increasing loan yields.
Got it.

Andrew Liesch

That's really helpful. Thanks for taking the questions here. I'll step back.

Gregory Garrabrants

Thank you, Andrew.

Operator

Kelly Motta, KBW.

Kelly Motta

Thanks so much for the question. On maybe I forgot I would kick it off. On the deposit side. Growth was quite strong in the actual incremental increase in deposit costs and actually it wasn't that large just wondering if you could provide additional color and commentary around the business lines driving that, where you're seeing the greatest opportunities. And I appreciate the color on loan pipelines and growth there but I'm just wondering, with a 100% or so loan-to-deposit ratio, how we should be thinking about the incremental funding of that, the parts of the business that's coming from Sure.

Gregory Garrabrants

I think that the some of the commercial lines of business are doing a good job on the cross-sell side, and we're continuing to gain traction there, which I think helps offset the deposit cost, the cap call business running at a good loan to deposit ratio, the regular C&I business doing a good job on the cross-sell side. We're having small levels of growth in a variety of different segments, our small business side on the consumer side. So it really is more a little bit of everything with that with a balance towards the commercial side continuing to add a lower cost deposits there. So yes, we had a we had an overshoot.

Kelly Motta

I guess if you were looking at the the increase in deposits versus loans. I think we expected loan growth to be a little higher than it was, but ended up having some unexpected payoffs, which but which reduced it a little bit below where we expected it to be.

Gregory Garrabrants

But that just gives us the opportunity to what you know, to be able to grow a little bit more this quarter.

Kelly Motta

Got it. That's super helpful. And then I'm just just trying to put some things together with the margin. I note on a core basis, ex the accretable, you're talking four 25 to for 35 and eight. I know there was about three basis points of accelerated accretion in there on that one payoff that you were discussing. Just wondering, do you have total amount of accretable yields that was the contribution to margin this quarter to round out the conversation?

Gregory Garrabrants

Derrick, do you want to take that?

Derrick Walsh

Yes. I think what you're asking for maybe in the on the rate volume table in the Q Kelly. So we break out the purchased loans in that rate volume table. So you can see the average balance for the three months ended March was around 979 million, contributing $41.7 million for the quarter for a yield of 17.05 of those of those specifically the FDIC. purchased loans.
Was that your question more than that 41 million isn't 100%.
The the accretion, right, like I'm getting from the cash flow statement that putting together, you know, Josh, in regard to the accretion, the accretion was about half of that 41?

Kelly Motta

Yes.

Gregory Garrabrants

Okay. Again, I think over I think over time and obviously a long time because if you're looking at 20 million of accretion, you're looking over the number of years, we broke that up. So you'll eventually be able to model out that that Jen, because over time that balance will obviously decline as a percentage of the total loans rate as loans grow and as those loans pay off. But it but it's a long time when you run that out, given the relatively long duration of those loans.

Kelly Motta

Got it. That's that's helpful. And then I know in your prepared commentary, you gave the mortgage loans on pipeline for sale, and it looks like mortgage banking income was up a bit quarter over quarter. Just wondering how thinking about the gain on sale of loans and any other sort of puts or takes with the fee income here?

Gregory Garrabrants

Yes, I think I'd probably say that flattish from this quarter is the right is the right sort of way to think about that. I don't expect that it'll it'll grow significantly. There's a chance it might grow a bit, but I think flat is a reasonable and most likely assumption Got it.

Kelly Motta

Thanks so much for the color that.

Gregory Garrabrants

Thank you.

Eric Spector

Thank you.

Operator

Edward Hemmelgarn, Shaker Investments.

Edward Hemmelgarn

Yes, thanks for your time or your zone on our union. And one I am voice notice about how low your deposit fees are digital. You're charging your customers. Does that help you at all? I mean? Or is it something that is really customers find important?

Gregory Garrabrants

Yes, I think so. It's a good question. I think that our customers, we've generally focused on telling customers that we do provide them lower fees. We've never been much of an overdraft or NSF player this with respect to our customer base, our customer base generally tend to be a little higher sort of more to the more of the higher end. So they don't generally have those those sorts of fees charged to them. I think on one side, it's reduced sort of regulatory style risk. I think over time, our goal and it is I have to admit you've been with us a long time. A longer term goal is to really trying to bring that robo advisor and others into a much more integrated way of providing customers value. So I think a lot of the traditional types of deposit fees that make up a lot of traditional bank fee income on that deposit side really aren't that conducive to growing deposits at the at the pace that we'd like to grow them. And so I think it is important to consumers when they're looking at their needs, their checking account or their small business accounts, whether or not they're charged a lot of wire fees or things like that. And I think so a lot of our small business customers are attracted to that. So I think it's our job and it's not an easy one to add value added services there and to find ways of seeing if we can get fee income out of those value-added services.
So just a little bit different, I think, than a lot of the types of fees that other banks charge.

Edward Hemmelgarn

Then moving on to loans, I mean, I was surprised by extension of the loan repayment, my guess, but perhaps given the high rates that are customers or your borrowers are now facing, do you expect that's going to be something that more turnover that you'll be seeing more and more of I mean, there's just a over this time period, but rates remain high until a stable?

Gregory Garrabrants

Yes, I am. I think it depends on the on the loan category. I think with the commercial specialty real estate side by the very nature of those loans, they do come to our end points where they generally get permanent refinancing. I think that if you look back more broadly, what we tried to do, which was very successful because we wanted to keep our loan book very short in a low rate environment in order to not take interest rate risk or have marks on our portfolio. And obviously, that's been very successful. I think the downside of that is you do have a bit of a treadmill, particularly in certain areas, which is why I think on the commercial specialty real estate side, we may end up lowering spreads a bit because we want to work on that to get the safest deals. And I think some of the volume. They're obviously there are fewer lenders, but there's also fewer projects and fewer loans that are just in the market generally. So look, I think I feel comfortable with the diversity of our loan origination platform, such that I believe we can still still continue to grow loans on at that five, 600 or plus level per quarter. But that composition, it will move a little bit quarter to quarter, and I think it will be more challenging than it otherwise was, let's say, last year, just given the nature of the market.

Edward Hemmelgarn

Can you are you are you seeing any any areas that are really giving you more opportunities now for loan growth on?

Gregory Garrabrants

Yes. I mean, I think our C&I verticals broadly are performing well. I think commercial specialty real estate at as having good origination quarters, I just think if you look at the payoffs and they're there, they're quite strong. I think the positive side of that is that we're continuing to turn that book, getting new credit evaluations at, I knew, you know, at higher cap rates and all those things I think it speaks very well to the performance of the book. So I don't really see anything other than I think saying other than single-family, which is just much more difficult because just the volume of transactions, so relatively low and the credit standards are relatively loose. So we're selling a lot of those loans through our conduit. And then in auto, we're just I think there's opportunity there. I just would like that market to settle out a little bit with respect to where auto prices go before we do a lot more there.

Edward Hemmelgarn

So okay, great. Thanks. And I for one, do appreciate your asset liability duration.

Gregory Garrabrants

Thank you. It's actually less much less state.

Operator

Gary Tenner, DA Davidson.

Gary Tenner

Hey, thanks. Good afternoon. If I could just follow-up first maybe on that line with regard to Presto, Greg, as you're talking about there being opportunities there albeit potentially at some tighter spreads. I'm wondering if within the markets that you traffic in in Crescent, which I think is primarily larger metro areas, is there a particular geography that you're seeing more opportunity than others right now in?

Gregory Garrabrants

That's been I think it has been a general shift because a lot of a lot of those loans are with our partners and I think our partners have deemphasized certain markets and increased other activity. And in other markets, I think that would be somewhat reflective of kind of population movement and those sort of things. So more Miami and Nashville and less New York, right? That kind of thing. But that doesn't mean New York still doesn't have opportunities that if I was going to just baseline that I think you're seeing a little bit of movement there. And you're seeing the the funds that we work with kind of change some of what they're doing as well, sometimes to be a little less concentrated, particularly in New York. So and I think that said where I would just have it.

Gary Tenner

Yes, I think generally, that's what I'm saying Got it. Thanks. And then on the fee side, if I look at the line items over the last four or five quarters, you have broker dealer and advisory, it has been some movement broker deals, while the lower advisory has been a little bit higher. But on a combined basis, we're kind of triangulating around 20 $21 million per quarter with the amount of investment you've made in the securities business. I'm just wondering maybe Roebuck isn't the right word, but what are you running up against that maybe is not allowing for some more accelerated growth in that business?

Gregory Garrabrants

Yes, that's a great question. And I agree with that assessment of really what it is is if you look underneath the that the the asset growth. What you see is we're boarding a lot of new firms getting a lot of new assets and the existing firms that we have in the AS. business, particularly are losing assets. So a lot of them are tabs. And a lot of what happens with camps is the advisors underlying that TAM structure either outgrow the TAM structure or they decide to break off and do other things or they're being bought. So we were looking at this and it was it was quite significant. There was above 20% of those top assets had run off and we'd replace them and more and generally grew net new assets. But that was a big hole to deal with.
Right. So if you had flat existing customers there, you would have had really good growth, but we didn't. And so I do think on that in general, and that is a a disappointing outcome. I think a positive associated with it is that at some point, I believe they'll be burned out there. I don't know when exactly that is.
And then I think the other element is that as that happens, the base of clients that we're getting are much more diverse, much more stable and they're growing. So I think that that does have a natural on movement that will allow it to save to stabilize. But that being said, I still think I'm Bill, it's not I would say that that's an area of our performance that definitely should be improved and we just launched the white label product and test. And so that's still very early stages. I think there's a lot of opportunity there, not only from the cross sell side, but also from the ability to streamline the processes right now, the process that exists between partner with respect to the paperwork and the just the manual nature of working with the broker dealers is very costly and time consuming. And so a lot of the work we've been doing with respect to the platform that should allow for cross-sell will also allow for improved operating efficiencies. So look, I think I think that that business, when it's built should have you had a very good longevity. But but on the AS. side, it really is the attrition of the current customers that's causing us to want to fall below where I would hope hopefully WERE.

Gary Tenner

Well, I appreciate the thoughts on that. It sounds like from what you're saying as well agree that there's not necessarily a great line of sight into stabilization there in terms of the churn. Is that fair?

Gregory Garrabrants

Yes, I think that I think say, I think that we'll be able to outgrow any churn. But what I really want to be able to do is come out and say I'm feeling great about growing the assets, 25% next year. And I'm not saying that because I'm not certain about the churn stabilization. And I think I think there's also something else going on here. Too, with respect to a lot of those, just the nature of the investment styles that some of those firms have at a higher rate environment, our SHOP business well positioned, maybe from a bond perspective as much as it should be because of those clients had sort of a different mix of what they were focused on. And I think that that's still playing through. That's not true with the newer advisors we're bringing on. But I think that's the reaction that some of those broker dealers have with some of those perhaps. So I think that'll play itself through over time. But I'm not I don't think it's done yet. I think it's I think it's got a little bit to run.

Gary Tenner

Great. Thank you.

Gregory Garrabrants

Thank you.

Operator

We've reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Gregory Garrabrants

But thank you, everyone, for your time, and we'll talk to you next quarter. Thank you.

Operator

That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.