Axos Financial, Inc.
Q3 2021 Earnings Call Transcript

Published: 2 May 2021

[Operator:]

[Operator:]

Greetings, and welcome to Axos Financial Inc.’s Fiscal Q3 2021 Earnings Call and Webcast. At this time all participants are in listen-only mode. I would now like to turn the conference over to your host, Mr. Johnny Lai, Vice President of Corporate Development and Investor Relations. Thank you. You may begin.

[Johnny Lai:]

Thank you, Devin. Good afternoon, everyone. Thanks for your interest in Axos. Joining us today for Axos Financial’s third quarter 2021 financial results conference call 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 three and nine months ended March 31, 2021, and they will be available to answer questions after the prepared remarks.

[Greg Garrabrants:]

Thank you, Johnny. Good afternoon, everyone, and thank you for joining us. I’d like to welcome everyone to Axos Financial’s conference call for the third quarter of Fiscal year 2021 ended March 31, 2021. I thank you for your interest in Axos Financial and Axos Bank. We delivered another strong quarter, with positive sequential growth in ending loan balances and net interest income, net interest margin expansion and solid credit performance. The year-over-year comparison is distorted by the seasonal H&R Block tax products, which we no longer provide. Axos announced third fiscal quarter net income of $53.6 million for the three months ended March 31, 2021, and earnings per diluted share of $0.89. Excluding net interest income and non-interest income related to the discontinued H&R Block relationship, net interest income and fee income increased by 21.9% and 43.7%, respectively, reflecting solid growth in mortgage banking and Axos Securities. Axos return on average equity for the third quarter of 2021 was 16.12%, and the bank’s efficiency ratio was 42.33%. Our tangible book value per share was $20.44 at March 31, 2021, up 17.1% from March 31, 2020. The highlights this quarter included the following

[Andy Micheletti:]

Thanks, Greg. First, I wanted to note that in addition to our press release, an 8-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 axosfinancial.com. I will provide some brief comments on two topics. Please refer to our press release or our SEC filings for additional details. As Greg mentioned, our provision for credit losses was $2.7 million for this quarter ended March 31, 2021, down from $8 million for the last quarter ended December 31, 2020. The decrease in the linked quarter was due to the quarterly change in point in time loan growth. As we look forward to additional loan growth over the next year, we expect the loan loss provisions to generally move with the ending balance loan growth for the quarter and based on the mix of loan types. As discussed previously, we exited our relationship with H&R Block and did not issue Refund Advance loans this quarter, which is a large portion of the $25.8 million decline in the loan loss provision this quarter ended March 31, 2021, compared to last year’s quarter ended March 31, 2020. Although we exited the H&R Block relationship, they agreed to continue to pass-through RIA payments through April 30, 2021, due to the IRS tax return processing delays. As of March 31, 2021, there was approximately $7.3 million of RIA loans left, 100% of which is covered by an allowance for credit losses. Next quarter, we expect to charge-off any uncollected portion of the $7.3 million RIA balance. However, that charge-off is not expected to impact our loan loss provision for the period. Moving to our Securities business. The pre-tax operating results for the Securities segment for the quarter ended March 31, 2021, compared to last quarter ended December 31, 2020, improved by $0.4 million when excluding a onetime cost of $1 million incurred this quarter. The adjusted results for the Securities segment would be about breakeven this quarter compared to a pre-tax loss of $0.5 million last quarter. The improvement is primarily due to a $1.7 million increase in broker-dealer fee income at Axos Clearing, resulting from the transaction growth this quarter compared to the last quarter ended December 31, 2020. The fee income benefit was partially offset by higher Clearing costs and lower net interest income. With that, I’ll turn the call back over to Johnny Lai.

[Johnny Lai:]

Thanks, Andy. Devin, we are ready to take questions.

[Operator:]

Our first question comes from the line of David Feaster with Raymond James. Please proceed with your question.

[David Feaster:]

Hey, good afternoon everybody.

[Greg Garrabrants:]

Hey, how are you David?

[Andy Micheletti:]

Hey, David.

[David Feaster:]

I just wanted to start – appreciate all the color with EAS. I was just curious about maybe some of the integration of that? And when you think you’ll be able to really start driving market share? Is the integration and conversion a pretty quick process? And when do you think you can start addressing some of the platform limitations that you talked about kind of in that supplement?

[Greg Garrabrants:]

Well, so we expect that the integration that we’re creating with the broker-dealer is – we expect that to be done by July 31. We also think that Liberty is a strong product. We have a RIA Custody sales team that sits in the Clearing company already. They have a pipeline. We already have a obviously much smaller RIA Custody business. So we don’t think that there is an impediment with respect to the Liberty technology that we need to fix in order to grow. In fact, we think it’s a good platform. It actually is best-in-class in many areas. It allows multiple models in a single account, things like that. So it actually is great in many ways. There’s a few things on the technology road map, like every technology road map that we want to work on. But we’re hitting the ground running. EAS has a pipeline with respect to – for growth that will carry over after the acquisition closes. We have a pipeline from a growth perspective. So we’ll be looking to get that momentum going. There may be a little bit of just a slowdown from a perspective of just having to make sure that we’re taking care of the current customers properly and that the transition goes well. But I think it’s something that should be able to grow almost immediately.

[David Feaster:]

Okay. That’s great. And then just looking at the loan growth, it was good to see the strength in the specialty CRE. Just curious how that – the pipeline in that business is spending? Where are you seeing strength? What kind of projects you’re more interested in? And then whether this is one of those segments that you talked about competitive new rates maybe pressure in margins some?

[Greg Garrabrants:]

Yes. So that the projects are mostly residential projects. I’d say the most significant are multifamily related often projects that are in lease-up, things like that, really residential, some condo type of loans which are performing very well. Frankly, they’re doing so well that by the time you make the loan, the units are getting leased up and sold. And obviously, the market on the residential side is very, very strong. With respect to rates there, we’re holding our own there. I do expect that that there will be compression in those rates going forward as we continue to look to grow balances there. But we also do not expect that single-family is going to have the decline in balances it had this quarter. We did adjust rates in single-family and the pipeline is up significantly. And so we believe that we ought to be able to hold our own, at least, may not get much growth. But we don’t believe that single-family will be dragging loan growth down in the way that it did this quarter on a going-forward basis based on what we’re seeing with respect to the pipeline. So it may not be the grower that we expected it, we’ve had historically, but I don’t think it will be via negative there. And then obviously, warehouse lending is really much more of a variable business. And so we expected that the temporary high balance we had, the high-growth we had in warehouse lending that we rolled through in the December 31, 2020 quarter was going to adjust a bit, and it did, which resulted in lower loan growth this quarter, almost entirely as a result of that adjustment. But – but we have a lot of new clients there. We’re still holding our own there as well. So hopefully, that will continue to be a much bigger business than it was four quarters ago.

[David Feaster:]

Okay. That’s good color. And then maybe just more of a higher level strategic question. We’ve seen several other banks enter into some crypto partnerships and investments. Just given the Securities business and kind of your innovative mindset, is this something you all have any interest in? And I guess, do you see opportunity to participate in that side of things, the cryptocurrency side of things at all? And if so, how?

[Greg Garrabrants:]

Yes. We do. The way that we’re going to incorporate it is in the trading platform, we will allow our clients to custody crypto assets and then trade those crypto assets for other crypto assets and then if they would like to monetize those assets, then they can, and they can spend that off with a card. So we don’t really have a plan right now to have those crypto assets used for actual transactions. There’s just – there’s not a lot of, I think, benefit right now there. I mean there’s – BMW came out and said, we’ll take crypto assets for a car. But if you exchange those crypto assets, and write a check or send a wire, they’ll also take that too. So yes, I think that it is increasingly becoming something that even just more conservative RIAs are recommending some percentage of portfolios being held in crypto assets. So that capability is being added to the Clearing company so that we can trade that. And I think it will be something to have that integrated service. I think it will be something that customers will value, given the way it’s consolidated.

[David Feaster:]

Okay, that’s great color. Thanks.

[Greg Garrabrants:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Andrew Leisch with Piper Sandler. Please proceed with your question.

[Andrew Leisch:]

Hey, good afternoon, everyone.

[Greg Garrabrants:]

Hey, Andrew.

[Andrew Leisch:]

So obviously, excluding the warehouse loan growth pretty solid here. Margin up nicely, but I guess, focusing just on the NII number, the dollars. Is this a good level to build from here? And the margin is going to do what it’s going to do based on liquidity flows, but is the $136 million repeatable going forward?

[Greg Garrabrants:]

Yes. I think – yes, definitely. And look, we expect to have loan growth. Pipelines are good, as I said, single family. I think that the – I think that with respect to new asset growth, I think you should expect it to come in at a lower rate, just in general, and – but not by a significant amount. But we expect to have good loan growth. And I think to the extent you may have had higher loan growth in your model given what happened on warehouse. You have – you have obviously going to adjust that for this quarter and roll that actual into that. But yes, I think that’s a fair statement.

[Andrew Leisch:]

All right. You guys actually had better loan growth than I was looking for this quarter.

[Greg Garrabrants:]

We have to be more optimistic.

[Andy Micheletti:]

Our guidance – our guidance really didn’t change. I mean we still are...

[Andrew Leisch:]

And that’s kind of why I’m still right around this 10% growth or so. But I guess, shifting over just to your provisioning comments. Is there anything justifying the allowance up near this level? I mean, your historical loss history is much better, but it sounds like you’re going to try to keep the reserve near this level or maybe drift lower adjusting for loan growth. But I mean, arguably, it could be a case for much lower than where it is right now. How do you see the provision playing out not just in the next couple of quarters, but over the next couple of years?

[Andy Micheletti:]

Well, yes, a couple of years is way out there. Let me cover the couple of quarters. I think our guidance was for now, we’re comfortable that we’re going to move that provision around growth. So obviously, we had a little bit of smaller growth this quarter at a point in time. If that point in time growth goes up, which we do expect it, depending on where it happens, the loan loss reserves for commercial are closer to between 1.5 and 2. So if all the net growth comes in commercial real estate, or commercial, you’re looking more at 2% on growth, which could bring that number back up. That’s our broader point is that we don’t necessarily expect it to go down from here if we’ve got good loan growth. Obviously, if single-family grows, that growth rate is – that loan loss rate is a little bit smaller. But the mix rates that we have put out there on our release are kind of what we expect to run going forward.

[Andrew Leisch:]

Got it. Okay, thanks for that detail. That’s all my questions.

[Andy Micheletti:]

Thank you.

[Operator:]

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

[Michael Perito:]

Hey, good afternoon guys. Thanks for taking my questions.

[Greg Garrabrants:]

Hi, Michael.

[Andy Micheletti:]

Hi, Mike.

[Michael Perito:]

On the EAS side, Greg, are the $1.2 billion of deposits, are those – like – I apologize, I just missed it, but are those operating accounts with the RIA has built?

[Greg Garrabrants:]

No, no. Their client cash that is held in those individual customer accounts that is subject to a sweep agreement. And those – those – the RIAs manage that cash and they have a different level of – there’s about 150,000 accounts there. And they have – and each RIA has its own asset allocation profile and risk tolerance and does things like that. But in general, that’s the way to think about that.

[Michael Perito:]

And is there – so is there opportunity to – when I’m just trying to think of how kind of the cross-sell of all this could fit in. I mean do they have a lot of – do the customers of these RIAs have a lot of access to credit type products today? On the – something like your security based lending? I’m just looking at slide eight of the EAS that you guys put out. I mean, is that stuff they have access to? Is that potential upside that could be rolled out relatively quickly. Any thoughts there?

[Greg Garrabrants:]

Yes. That’s a great question. And I think that’s very relevant. We didn’t put that in the accretion numbers, but you make a lot of good points. So given that this wasn’t on a broker-dealer platform, they had zero margin lending with these clients, which was something that was concerned and limited the ability of the RIAs to maybe place all the assets of a particular client. So they may be dual custodian things or they just don’t have that. So you don’t have so with – once that’s integrated to a broker dealer, you can have the margin lending. Next, the securities-based line of credit idea, which is a very secure form of lending, but the ability for the bank to automate the locking up of liquid assets for personal loans or connecting that to a very low interest rate credit card. I mean, those are the type of things that are out there. And then finally, obviously, if you’re an RIA and you’re competing against, you just left Morgan Stanley, and you had a 40% split there. And now you’re keeping everything and you’re paying Axos Custody and all of a sudden, your client needs a mortgage loan. Well, if Morgan Stanley is saying, well, hey, gee, it’s really too bad you left, and I know you like your advisor, but we’re over here. And if you just had your money over here, we can give you this mortgage loan, and that’s a significant problem. So one of the sets of services that are lost by breakaway advisors from warehouses as they lose access to banking products. So we believe, and we’ve already proven it out. Some – we have some RIA custody business now. And there’s been some RIAs who have really taken to this. And during the refinance boom, they said, well, part of my value is going through every one of my clients’ portfolios and introducing an Axos mortgage product to those clients because that we’re giving them – we give them a better deal. We said we would waive the lender fee. So that was a significant benefit to their customers. And they went out and said, look, you guys need to do this. And there’s no payments there. It was just – look, this is a good opportunity to get a mortgage. So that is, I think, definitely an opportunity. And then the way we’re integrating the technology is we built a really strong front end platform. That front-end platform can also be utilized for all of these end clients, both Clearing and RIA Custody to see their statements and whatever else. And then to the extent that a banking product is applied for, it gets applied for. And that customer is then a core banking customer. So that we have work to do there because Liberty has its own app and so we have our app, and so we have to work through those sort of things. But those things are not hard to do, and we’ll get it moving. It will take a bit but we’ll get it right. And I think there’s a lot of opportunity. And when we talk to the RIAs, there’s different levels of enthusiasm about this, but they’re universally concerned, mostly universe maybe an overstatement, but a wide majority are concerned that without these products, there’s an angle created by a competitive wealth manager to, to gain access to that client.

[Michael Perito:]

Right. Well, I mean, if you just think about who’s going after these types of clients, right? I mean, it’s probably a lot like Chase private was like things like that, that have all these things, right? So I mean if you can’t compete with that challenge, I mean, it would seem like beyond securities backed lending, mortgages, I mean, you could even possible to fill like money market type deposit accounts. I mean it would seem like there’s a pretty full suite of services that you could offer that I imagine, they weren’t really able to cross-sell previously, I guess...

[Greg Garrabrants:]

Yes. Agreed. I think that’s absolutely right. And we have the technology to deliver that seamlessly. Because all the applications for our products are all API enabled. And so whether the RIA facilitates that or whether it’s facilitated through a mobile application or online, we have the ability to make that a relatively seamless process. So I think that’s something that’s really exciting. And frankly, the big custodians have not done that well. But we have – because of our – obviously, our history and how – where we’ve come from, we have great account opening technology. That account opening technology is something that it would take a very large RIA to be able to generate and make that work. So how much does our account opening technology come into play? And how much does the consumer platform come into play? Those will be interesting opportunities on a going-forward basis.

[Michael Perito:]

Got it. And as you think about the – clearly, actually, you just talked about, right, there’s a lot of opportunity, a lot of ways to dice it up and see that there’s cross-selling opportunities. As we think about the kind of just the risk that that comes with those opportunities in an acquisition like CIS, is it fair to think that a lot of the risk would look similar to that of a core clearing when you guys brought that onto the platform? I mean, in terms of kind of like fraud and things of that nature. Are there anything else that we should be considering for those of those bank guys, I guess, that are with?

[Greg Garrabrants:]

No. I think that this is – yes, I think this is a much lower risk – is much lower risk from a standpoint of what you’re worried about, obviously, fraud or those sort of things. And the reason why is just the type of clients that the maxed RIAs have, these are just simply domestic, relatively high net worth individuals that have hired somebody to manage a balanced portfolio of mutual funds, ETFs and some listed equities, right? So it’s really not it’s not something where you’ve got a lot of massive trading through or specific trading through these platforms. There’s not – in Axos Clearing, you’ll have people that’s short, right? And so obviously, managing the liquidity positions of those shorts and making sure that they’re doing it with the right stocks and all those kind of risks. That just really isn’t coming up in an RIA Custody business. So this I would say that this is a much easier business to manage from the market risk perspective.

[Michael Perito:]

Makes sense. And then just lastly for me. If I think just high level from you guys, right? The entrance potentially by the end of the year to the crypto space one way shape or form. I think you guys, obviously kind of have a dual-pronged strategy with a lot of what you do, right? There’s kind of a consumer element and then there’s a commercial element and is it fair to say that the crypto side will likely evolve into both over time? I mean it sounds like it’s more consumer-focused out of the gates here. But there’s a really kind of institutional adoption of crypto’s in such early stages. Some banks do a lot there already. I mean, is that an opportunity you guys are considering as well as you kind of go down this path? Or any added thoughts there would be great?

[Greg Garrabrants:]

Yes, I think it is interesting. I think that it will inevitably lead there with respect to that. And I think it’s a – I think those are interesting opportunities.

[Michael Perito:]

Got it. Well, thank you guys. I appreciate it. Thank you.

[Greg Garrabrants:]

Thanks, Mike.

[Operator:]

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

[Gary Tenner:]

Hey guys, good afternoon.

[Greg Garrabrants:]

Hey Gary.

[Gary Tenner:]

I wanted to ask a couple of questions. The first on VAS, you talked about growing the $59 million, I think, or $58 million run rate of 2020, about half of that was from net interest income. So – and I couldn’t quite square kind of what those trailing numbers look like relative to your earnings accretion assumptions. And I just wanted to get a sense of what your kind of working assumption is with regard to maybe the incremental margin on those deposits that come over? And obviously, as you pointed out, there’s going to be a mix of whether you keep them on balance sheet or off. But just trying to get a better sense for how you’re thinking?

[Greg Garrabrants:]

Yes. Yes. So here’s the way we thought about it, and these are the assumptions, and you can see them on page seven of the earnings supplement. But we said we’re going to assume that EAS’ client cash earned 75 basis points. And that then we have a $3.6 million interest expense savings from a four to five basis point reduction in Axos Bank’s interest bearing cost. Now the reality of it is, we already have – we have – now we have an extra $1.2 billion of deposits. We have $400 million outside Axos and Clearing. We’re going to aggressively manage down our deposit cost as a result of this. So we sort of picked a pretty, I think, a pretty conservative estimate and said, okay, let’s assume we can only take our deposit cost for all interest-bearing, checking, savings and money markets across consumer and commercial, down by four to five basis points. Now that’s, that’s – I think that’s a pretty conservative assumption, but that’s what we have in there. And then we have EAS client cash earning that. When you think about it, it’s actually interesting from a conceptual perspective, when you try to come up with these numbers because what you’re supposed to be doing is saying, what would my economics be with and what would be my economics be without, the reality of this business is it generates a lot of zero cost, very sticky deposits at an all-in cost that’s lower to service than, let’s say, consumer checking accounts, which, although they may have – they have obviously, we have ones that have interest rates and those interest rates are coming down as we continue to mature, but we also have a lot of operating costs associated with those accounts. And those accounts are smaller, obviously, on average than, than high net worth accounts from RIA custodies. So that’s what we’ve made the assumptions around. I think how that actually looks sort of going forward is that it’s going to look like aggressive reductions in cost of funds pretty quickly here in order to make room for those deposits. And then also – and then also, it enables growth at maybe more competitive loan rates as well, right? So that is another element that assists as we think about balancing this, this loan yield, NIM, asset growth set of variables. This just gives us a lot bigger tool, and we’ve given the assumptions that we’ve made with respect to the accretion in the supplement deck.

[Gary Tenner:]

Okay. Yes, fair enough. I mean, we’re certainly looking at it in a vacuum versus combing old and the rating impact of the parts of the business are two different animals. And I missed that second-line added on that slide seven versus the slide in the deck last week.

[Greg Garrabrants:]

Yes.

[Gary Tenner:]

So I appreciate that. In terms of the nationwide deposits. Andy, can you just kind of remind us what the kind of remainder is of those deposits that you’re going to work down and what’s the prevailing rate is?

[Greg Garrabrants:]

And that’s just the CDs. I mean, there’s – there was nationwide checking as whatever that we’ve adjusted and is there good stuff.

[Andy Micheletti:]

Yes. Let me give you a couple of snippets that there’s a big piece in July of this year, $114 million at 2.29%. There’s a $60 million piece in August at 1.85%. There’s a $39 million piece at 1.57% in September. So that – as you can see, that quarter is where that the bigger pieces start to amortize off across that. And so the whole book within the CD Group as you look at across nationwide, we’re probably looking about, about 700 – call it, $710 million of the $331 million balance is just nationwide.

[Greg Garrabrants:]

And some of those were high – they were long-term...

[Andy Micheletti:]

Very long-term.

[Greg Garrabrants:]

That are coming due that were higher rate from a different environment. So obviously, there’s excess deposits across the bulk of the securities businesses, and we’re renewing some of these. But frankly, obviously, the rates are going to adjust significantly to the extent people offer renewal.

[Andy Micheletti:]

Yes. And let me give you two more numbers. I know I’m showing a lot of numbers out there, but you want them. $55 million in that group, it’s coming off in May for that group at 188 and then another $55 million in June also at 188. So, that gives you kind of a flavor of how fast it’s coming down.

[Greg Garrabrants:]

Right and I think maybe a broad conceptual way to think about this, and I know it’s a lot of movement. But obviously, with what we’ve been doing on the cost of funds side, it’s going to get a lot better, right? We obviously, of course, we’re adding cost with what we’re doing in these businesses. We will get more scale there as we get into these businesses and put our process improvements in place and things like that. But obviously, having lower funding cost also allows you to have loan growth because you have more flexibility on loan rates, and so within the target NIM ranges that we’re trying to get to. So all of those kind of move around a bit, but they end up getting you a little more flexibility with respect to loan growth as a result of an ability to offer a more flexible set of loan rates.

[Gary Tenner:]

Got it. And then just I’m going to bounce back to EAS for a second, and I don’t think I missed this, but in terms of goodwill or any intangibles, customer relationship intangibles or anything like that. Have you talked about that at all? Or can you give us any kind of insight there?

[Andy Micheletti:]

Yes. We – it’s obviously super early, Gary. So we’re just giving you a very rough estimate. This could change one way or another. And I’ve got Derek here. But Derek, in the end, what did we end up using as total intangibles?

[Greg Garrabrants:]

Total intangibles would be between $40 million and $50 million, of which about $5 million to $10 million of that $40 million to $50 million is internally developed software.

[Andy Micheletti:]

So a large portion of it is, is.

[Gary Tenner:]

All right.

[Operator:]

Our next question comes from the line of Steve Moss with B. Riley Securities. Please proceed with your question.

[Steve Moss:]

Hi, good afternoon.

[Greg Garrabrants:]

Hey Steve?

[Steve Moss:]

Maybe just following up in terms of – just in terms of yields. Just wondering, to start, where are new money yields coming in for loans these days?

[Greg Garrabrants:]

The single-family is probably down. The pipeline is up. The yields are probably new money yields, I think, are down almost 25, 30 basis points, something like that. I think that’s about right. And then the C&I stuff is a max. Right now, it really isn’t down much. I was maybe down a little bit every now and then, but not much. And then multifamily depends on the mix and say maybe from this quarter, I don’t think it’s – I think the pipeline is pretty stable. So I just – I don’t want to overstate my concern about that or that there’s going to be some massive cut. But I just think looking forward and thinking about the competitive environment and where it could go that is just an option associated with what’s happening with our funding cost. Single-family, though, is something where we have cut rates and the results is – and we have enough run time, I think, to see that kind of play out a bit in the pipeline. And so that’s kind of where that’s coming out.

[Steve Moss:]

Okay. That’s helpful. And then in the quarter here, your SBLOC lending took off pretty good growth there off a small balance. But just kind of curious how you’re thinking about SBLOC over the next six to 12 months? And any color that you can give there?

[Greg Garrabrants:]

Yes. I mean, there really is – really is – on just the SBLOC side, there’s a couple of – I mean, there’s a consumer integration that occurs for both the end clearing and the RIA Custody clients. And then it is also an institutional integration that occurs for the brokers and the RIAs so that they can offer those to their clients. That’s not systematized right now and exactly the way it needs to be, but it’s on the tech road map. And so right now, these deals are being done. More manually and sourced as the demand comes up and people ask for them and things like that. And they’re much more of a – the broker has a client who needs this and that kind of thing. But over time and then obviously, the assets are custody declaring and they’re locked up, and they’re monitored in the same way a margin would be monitored to ensure the collateral is there. So yes, so that’s – I think that right now, it’d probably be a little more sporadic, but over time, I think those loans will become smaller, more granular and much more utilized. I think one of the goals to be that much more utilized like an overdraft line of credit or something almost or just the liquidity management tool. So a customer could avoid selling assets and kind of just bridge those gaps to just sort of sit there and one click and they want account kind of thing and I think that’s – I think that’s going to be a pretty neat synergy with respect to everything we’re doing.

[Steve Moss:]

Right. Absolutely. Any idea in terms of time line as the one that could be rolled out on the tech side?

[Greg Garrabrants:]

Yes. I think self-directed trading is coming in this June quarter. But we’re taking this as a – these are very kind of targeted rollouts with slow sort of – we’re not looking to try to blow out some massive number of customers we’re going through. We’ll put some customers on there. We’ll make sure everything is working the way we expected to and everything is functioning well. I think probably the SBLOC side stuff is probably more – that sort of one click kind of deal, I think is probably be more in the first calendar quarter of 2022, probably, just given what we’ve got on the plate so far.

[Steve Moss:]

Okay. That’s helpful. And then just on expenses here. Just kind of curious as to how you guys are thinking about total expenses going forward, continued growth in data processing, just – but overall trends, I’m curious about.

[Andy Micheletti:]

Sure. Yes. No, we do expect expenses to come up some next quarter. In general, I would think about $1.5 million or thereabouts, potentially a little bit more. Where that adds up, of course, there are always pluses and minus minuses in the salaries area, we had a couple of offsets, and we’ll have higher FICA expense. So I’m expecting a little bit over $1 million to $1.5 million more there on that side. In that sense, professional services, we did have some onetime items. I’m expecting that to actually come down by about $500,000 data processing up $500,000.

[Greg Garrabrants:]

Isn’t that mostly the Clearing running through because that would be the cost of the transactions, right?

[Andy Micheletti:]

Yes, there’s the cost of transaction and the other legal stuff as...

[Greg Garrabrants:]

That data processing is going to...

[Andy Micheletti:]

Yes. Well, in data processing, we just have a number of items that are coming through that are getting them ultimately project oriented. They’re not capitalized on. Yes. Those are the big things and then the rest of smaller numbers in the other area. Other G&A was up primarily because last quarter was down. We reversed $1 million bucks of – this is where the actual allowance associated with the uncommitted liability runs through. And so not this quarter, but last quarter, we reversed $1 million of it, which reduced last quarter’s other G&A expense. And so there’s $1 million that you would add back that would do that. But all in all, we do expect other G&A to be down slightly. So when you add up all those numbers, it’s about – around $1.5 million increase maybe in operating expenses consolidated.

[Steve Moss:]

Great. I appreciate all the color. Thank you very much.

[Operator:]

Thank you. Our final question comes from the line of Tim Coffey with Janney Montgomery Scott. Please proceed with your question.

[Tim Coffey:]

Thank you.

[Greg Garrabrants:]

Hey Tim.

[Tim Coffey:]

Andy, if you can just stick on expenses for a little bit real quick. Do you anticipate any acquisition expenses going through in the June quarter?

[Andy Micheletti:]

No. Nothing material.

[Tim Coffey:]

Okay. And then within the banking and service fee, line item in noninterest income. Was there a onetime item in the quarter-to-quarter change?

[Andy Micheletti:]

On – you’re saying on the linked quarter change?

[Tim Coffey:]

Yes.

[Andy Micheletti:]

Okay. So where we see our stuff coming down about from 10 for the other things. So I know two – a little bit over two is associated with. There’s an higher fee that is a statement fee that gets earned onetime per year at December 31. That’s not repeated in the March quarter. So that’s going to be, call that $2.5 million. So that’s the majority of the piece there. Other than that in the other pieces.

[Greg Garrabrants:]

That’s the main thing. I mean – yes, there might be a little more a fee on the bankruptcy side, the Axos fiduciary services side probably is up a little bit. And then...

[Andy Micheletti:]

Yes, for that relative to the piece. But...

[Greg Garrabrants:]

Block. There is block income in Q2.

[Andy Micheletti:]

Yes. So the final – there was block had some tailing fees that we earned in the December quarter. That’s now gone. And so the number you’re seeing this quarter based on those things, is closer to the run rate.

[Greg Garrabrants:]

Except for the fourth quarter next year, right?

[Andy Micheletti:]

Yes, except for the fourth quarter next year.

[Tim Coffey:]

Yes, we can cover that one later in the year. And then, Greg, is it too far a feel to think that as you start to integrate your customers across the ecosystem with EAS and the legacy Axos that that you might see fewer payoffs or maybe a potential slowdown in loan payoffs as people stay in the ecosystem?

[Greg Garrabrants:]

I think there’s a possibility there with respect to some element of loans. But a lot like the commercial specialty real estate stuff, it really is designed to pay off, right? I mean that’s the nature of a lot of the products. So that’s potentially right. I think I think that is – we’re – I think we can do a much better job. I think where it probably have the biggest impact is in all the consumer stuff. And then single-family, I think that could be an impact. And we are doing retention stuff. Now we’re getting better and better at it. But I do think that a customer that has – as an RIA relationship and a custody relationship and all these different things, I think that is going to help over time with respect to that. And so yes, I think that’s a possibility. I don’t – I wouldn’t try to model it, but right now, and it’s certainly a longer-term type of potential benefit.

[Tim Coffey:]

All right now, that makes sense. Those are my questions. Thank you.

[Greg Garrabrants:]

Thank you.

[Operator:]

And with that, ladies and gentlemen, this concludes our question-and-answer session. And I would like to turn the floor back over to management for closing remarks.

[Greg Garrabrants:]

Thank you, everyone. Appreciate the time to listen to us, and we’ll talk to you next quarter.

[Operator:]

This concludes teleconference. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.