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Axos Financial, Inc. (AX) Q3 2019 Earnings Call Transcript

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Axos Financial, Inc.  (NYSE: AX)
Q3 2019 Earnings Call
April 30, 2019, 5:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Johnny Lai -- Vice President, Corporate Development and Investor Relations

Thanks for your interest in Axos. Joining us today for Axos Financial, Inc.'s Third Quarter 2019 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, 2019 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 for this call were provided on the conference call announcement and in today's earnings press release.

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

Gregory Garrabrants -- President and Chief Executive Officer

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 2019 ended March 31, 2019. I thank you for your interest in Axos Financial, Axos Bank and Axos Securities.

Axos announced net income of $38.8 million for the fiscal third quarter ended March 31, 2019 down from $51.3 million earned in the fiscal third quarter ended March 31, 2018 and unchanged when compared to the $38.8 million earned in the prior quarter. Earnings attributable to Axos's common stockholders was $38.7 million or $0.63 per diluted share for the quarter ended March 31, 2019 compared to $0.80 per diluted share for the quarter ended March 31, 2018 and $0.62 per diluted share for the quarter ended December 31, 2018. Excluding non-recurring expenses, non-GAAP adjusted earnings and earnings per share were $51.5 million or $0.84, respectively for the quarter ended March 31, 2019.

Other highlights for the third quarter include ending loan and leases increased by approximately $1 billion, up 12.8% year-over-year and 4% annualized from the second quarter of 2019. Strong originations in multifamily, small balance, CRE and C&I were offset by lower production in jumbo single-family and a few large payoffs in our commercial specialty real estate loan portfolio. For payment for H&R Block franchise and Emerald Advance loans also accounted for $65 million of sequential decline and the ending loan balances at March 31, 2019. Total assets reached $10.9 billion at March 31, 2019, up by $1.1 billion compared to December 31, 2018 and up $0.9 billion from the third quarter of 2018.

Net interest margin was 4.82% for the quarter ended March 31, 2019, up 95 basis points from 3.87% in the second quarter of fiscal 2019. Average loan yields increased by 7 basis points to 6.68% compared to 6.61% in the quarter ended March 31, 2018. Excluding the impact from H&R Block's seasonal loan products and excess liquidity, Bank-only net interest margin in the quarter ended March 31, 2019 would have been approximately 3.9%, up 8 basis points from 3.82% in the third quarter of 2018 and up 9 basis points from 3.81% in the second quarter of 2019.

Capital levels remained strong with Tier 1 leverage of 8.68% at the Bank and 9.25% at the holding company, both well above our regulatory requirements. Return on equity was 15.34% for the third quarter of 2018 compared to $22.84% in the corresponding period last year. Excluding one-time merger related expenses, non-cash depreciation and amortization expenses and reverse of -- for potential trading losses related to a corresponding clearing client, our non-GAAP adjusted return on equity would have been 20.37% in the third quarter of 2019.

Our credit quality remained solid with 4 basis points of net charge offs and the non-performing asset to total asset ratio of 48 basis points this quarter. Our allowance for loan loss represents 161.1% coverage of our non-performing loans and leases. Our efficiency ratio was 52.7% for the third quarter of 2019 compared to 46.5% in the second quarter of fiscal 2019 and 32.4% for the third quarter of fiscal 2018. The primary driver of the year-over-year and sequential increases in our efficiency ratio were the addition of the COR Clearing and WiseBanyan acquisitions and the reserve for potential losses related to a corresponding clearing client. Excluding the impact of the client loss and one-time expenses, the consolidated efficiency ratio would have been 41.2%.

The Bank business unit efficiency ratio was 35.3% this quarter. A number of relatively small items individually contributed to a more meaningful adverse impact collectively on our Bank efficiency ratio this quarter. Increased professional services mostly related to M&A and legal expenses accounted for $1.2 million of the increase in non-interest expense. Depreciation and amortization expenses related to acquisitions and our software development increased to $4.4 million this quarter from $3.86 million in the prior quarter and $2 million in the third quarter of 2018. A non-cash mark related to the change in quarter and value of our mortgage loan servicing book reduced our mortgage banking income by approximately $1 million.

Finally, we had an $821,000 non-cash OTTI charge in our security portfolio as rates dropped at the end of the quarter. Excluding these unusual items, some of which may reverse in the future, our Bank efficiency ratio would have been 34.3% in the quarter ended March 31, 2019. Axos Clearing had an efficiency ratio of 86% excluding one-time merger related costs and the aforesaid mentioned client loss reserve. Although, over the intermediate term, we will improve the efficiency of the clearing business as we bring them inside 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 at significantly higher returns on capital as we grow the business, given that the business is focused primarily on fee income and suite balances that can be placed off balance sheet.

We originated approximately $2.5 billion of gross loans in the quarter, up 1% year-over-year. Originations for investment decreased 0.2% year-over-year to $2.2 billion and originations for sale increased 11.2% to $287.9 million, reflecting higher originations of refund advance and correspondent lending loans. Ending loan balances increased by 12.8% year-over-year to $9.1 billion. Our loan production for the third quarter ended March 31, 2019 consisted of $58 million of single-family agency eligible gain on sale production, $285 million of single-family portfolio jumbo production, $543 million of multifamily and other commercial real estate portfolio production and $584 million of C&I production, $1.164 billion of refund advance production and $51 million of auto consumer unsecured loans and seasonal H&R Block franchise loans.

For the quarter -- third quarter 2019, originations are as follows. The average FICO for single-family agency eligible production with 734, with an average loan to value ratio of 70.4%. The average FICO for the single-family jumbo production was 729 with an average loan to value ratio of 62.1%. The average loan to value ratio or the originated multifamily loans was 53.5% and the debt service coverage ratio was 1.32. The average loan to value ratio of the originated small balance commercial real estate loans was 64% and the debt service coverage ratio was 1.17%. The average FICO of the auto production was 757.

At March 31, 2019, the weighted average loan to value ratio of the entire portfolio of real estate loans was 57%. Our jumbo single-family mortgage business had a disappointing quarter, originating $285 million of new loans compared to an average of $389 million per quarter for the past two years. Increased competition from non-bank lenders and a subdued appetite by high net worth individuals in the first two months of 2019 following the precipitous decline in the stock market at the end of last year resulted in weak jumbo mortgage production in January and February.

While we saw better production in March as mortgage rates fell and the stock market rebounded, the improvement was not sufficient to offset the weakness in the first two months of the quarter. Prepayment rates and jumbo single-family loans remain elevated as some borrowers refinance away from us, while we maintain our credit and LTV standards. We expect our jumbo mortgage production to rebound to $325 million per quarter starting in the fiscal fourth quarter ending June 30th. Given where we are in the housing cycle, we expect net growth in the jumbo single-family portfolio to be in the low mid single-digits approximately $150 million to $200 million per year on a net basis.

We had approximately $1.8 billion of multi-family loans outstanding at March 31, 2019, representing 20% of our total loan book. The portfolio grew by $45.8 million or 2.7% linked quarter. The weighted average loan to value ratio of our multifamily loan book is 53% based on the appraised value at the time of origination. The lifetime credit losses in our originated multifamily portfolio are less than 1 basis point of loans originated over the 18 years we've originated multifamily loans.

Our C&I lending business posted another strong quarter with $548 million in loan originations. We continue to focus on well-secured well-structured asset base loans and lines of credit to credit worthy borrowers financing high quality projects in attractive markets in both our lender finance and commercial specialty real estate businesses. Our commercial lending team continues to grow in terms of relationships, product types and expertise.

Loan demand remains solid overall, despite increased competition from non-bank lenders in certain segments of jumbo mortgage and consumer lending. Demand for single-family agency mortgages is down meaningfully across the industry with purchase transactions accounting for the vast majority of industry origination volume. Our loan pipeline was $1.22 billion at March 31, 2019 consisting of $476 million of single-family jumbo loans, $68 million of single-family agency loans, $163 million of income property loans and $509 million of C&I loans. We continue to transition our portfolio away from single-family lending into C&I lending and commercial real estate.

We have proactively eliminated higher cost distribution and marketing channels for single-family agency mortgages and reassigned team members to other consumer lending and consumer deposit businesses. We continue to expand our distribution channels and refine our marketing strategies within our jumbo mortgage lending business and expect origination volumes to rebound from levels we experienced this quarter, although production will not reach levels we had two or three years ago, given where we are in the housing cycle and our adherence to low LTV underwriting. We anticipate strong originations across our auto, small balance commercial and C&I lending groups as we identify new opportunities to meet or exceed our risk-adjusted return criteria. On an annual basis, we are targeting overall loan growth in the low teens, which we believe is prudent given the competitive landscape for loans and deposits, the credit cycle and the shape of the yield curve.

Switching to funding, total deposits increased by $315 million quarter-over-quarter to $8.7 billion. Total non-interest bearing deposit balances were approximately $1.8 billion at March 31, 2019, up by $762.9 million from December 31, 2018. The increase in non-interest bearing deposits was driven by deposits related to tax refunds for H&R Block loan customers primarily and by commercial bank and deposit vertical increases. At March 31, 2019, checking and savings deposits represented 71% of total deposits at March 31st compared to 67% at December 31, 2018. Of that 71%, 30% of our deposit balances were business and consumer checking accounts, 20% percent money markets, 5% IRAs, 5% savings and 11% prepaid accounts.

We completed the acquisition of MWABank's deposits and successfully converted the clients to our Bank last month. The MWA transaction added approximately $173 million of interest-bearing and non-interest bearing deposits. We paid no deposit premium to the seller. In addition to the aforesaid mentioned, the MWA deposit acquisition, we closed the COR Clearing and WiseBanyan digital wealth acquisitions in the quarter ended March 31, 2019. The two combined businesses, as reflected in the new operating segment classified as securities on our SEC filings provide us with a solid foundation from which we can expand our security servicing, wealth management and private label banking services to RAAs, independent broker dealers and their underlying retail clients.

We've already made good initial progress in the first 60 days since closing the transaction, including rebranding COR Clearing to Axos Clearing, hosting productive meetings with team members, clients and prospects and establishing joint meetings to map out a comprehensive product and technology roadmap for the combined businesses. It's still early days and we're extremely excited about the opportunity to serve small and medium sized correspondent broker dealers and RAAs a market with over $2 trillion of client assets and provide them and their clients with access to a comprehensive set of banking products and services through a platform and interface that is convenient and easy to use.

What client and prospects have told us is that they're not receiving the type of technology and customer service they need from existing custodians, clearing firms and third-party vendors in order to successfully manage and grow their practices. Industry consolidation continues to result in reduced services and increased costs for small and medium sized RAAs and broker dealers. With our existing presence in this industry through Axos Clearing, we are committed to investing alongside our clients to grow our assets, clients, deposit balances and technology services in this space.

On March 8, 2019, we disclosed in an 8-K filed with the SEC that Axos Clearing, our newly acquired clearing broker dealer formerly known as COR Clearing was due approximately $15.3 million from the trading activities of a correspondent broker dealer and that the collection of that receivable was uncertain. On March 8, 2019, Axos Clearing entered into an agreement with a trader who caused this loss under which Axos Clearing was to be paid $10.5 million, $7.5 million immediately and another $3 million over time secured by the trader's residential real estate. The initial payment was not received when due and Axos Clearing filed a breach of contract lawsuit against this individual. At March 31, 2019, no amount has been collected and we concluded that the timing of any repayment of the $15.3 million receivable from this individual or the responsible broker dealer, which has discontinued its trading activity remains uncertain. A loss provision was included in our consolidated operating expenses for this quarter for the full $15.3 million receivable. The correspondent broker dealer is required to indemnify Axos Clearing and has initiated a FINRA arbitration against this former trader seeking recovery for the entire loss and other damages.

Our holding company's risk team, including the Axos Clearing risk team team has conducted a detailed review of the circumstances under which the loss occurred and a comprehensive review of our internal risk systems. Design enhancements to our own systems and procedures to better detect subversion of risk controls have been implemented and the risk controls of selected correspondent broker dealer customers have been confirmed and tested. In addition to the work we have completed, we are making investments in further enhancements to risk systems, limits and processes designed to limit similar events. We are actively building our client pipeline through targeting that region marketing of Axos Clearing.

When you consider the acceleration of investments we are making in risk and other systems, changes and enhancements to the management team and lower projected fee income from selected client rationalization, we can certainly expect that the deal accretion we initially projected in year one for COR will likely be neutral from an EPS perspective. With that being said, we have early achieved some early client success in the short-term we have owned the business, including signing three corresponding clearing firms with over 8,000 client accounts and approximately $36 million of protected cash balances.

While it typically takes two or three quarters for a new correspondent to transition all their client accounts to a new clearing firm, these client wins suggest that opportunities to grow our securities clearing and custody clients and asset base is robust. The response to utilizing our front-end client interface to sell banking products to our correspondent clients customers has been overwhelmingly positive and delivery of technology that will enhance the client experience and expand our product offerings will be a top priority.

Securities base lines of credit and RAA custody represent meaningful long-term revenue opportunities and the source of incremental upside in the short-term if client uptake ramps faster than we expect. Assuming flat fee income and sweep interest income, we expect the combined securities businesses, which include Axos Clearing and WiseBanyan, to operate at a high 80s and low 90s efficiency for the next year compared to the mid to high 70s efficiency target for the medium to long-term for Axos Clearing operating range. And WiseBanyan will operate at a loss of approximately $3 million to $4 million in the first year as we incorporate their platform into our universal digital banking platform and scale the platform to spread the fixed cost of operations.

With the successful deposit conversion behind us, we launched our relationship with Nationwide to offer co-branded banking and insurance products and services to Nationwide associates, policyholders and general market customers earlier this year. The agreement with the initial term of five years encompasses a variety of deposit and lending products to consumers and small businesses. Since our soft launch in February, we have taken over our mortgage relocation services for Nationwide associates, executed a win-back campaign with Nationwide associates, added a banking services tab on Nationwide's dedicated website for small business owners and started building data and marketing strategies for specific consumer lending channels. We have also met with business unit leaders at Nationwide to discuss specific new opportunities to offer bundled banking, financial wellness and benefits packages to target client segments, such as pet owners and RAAs. We appreciate the collaborating -- collaborative and growing relationship with Nationwide.

We continue to make good progress in our strategic initiatives to grow and expand our commercial banking business. Axos Fiduciary Services, the trustee and fiduciary services business we acquired from Epiq in April 2018 continues to perform well. Last month, we successfully transitioned our data and team members from Epiq to our new office in Kansas City. The transition allows us to work more effectively and while maintaining a responsive and stable infrastructure from which we can trust -- serve our trustee clients. 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-Chapter 7 legal matters. Concurrently, we are actively exploring adjacent market opportunities to serve trustees in non-Chapter 7 cases. At March 31, 2019, dozens of trustees with approximately $300 million of non-interest bearing balances have chosen to transition their banking services to our Bank. As more trustees are able to provide testimonials to their peers about the responsive service and strong value proposition Axos Fiduciary Services provides, we are hopeful that we can add new trustees.

A second component of our commercial banking strategy is expanding our geographic presence and industry expertise through selective additions of experienced bankers and bank teams. This started about two years ago when we hired a team and opened a commercial banking office in Orange County. Based on the profitability and success of that initial group, we added additional senior bankers from other community and regional banks in the past year. More recently, we hired an experienced team on the East Coast to target general middle market deposit and specialty deposit verticals. This group will work side-by-side with our existing commercial lending team and the significant existing lending book of business we have when we open our first East Coast office in New York later this quarter. We believe our regional center strategy is allowing us to attract the necessary talent in markets where we have a significant existing presence and will allow us to develop a balance between our consumer and commercial bank as we try to become a $15 billion to $20 billion bank.

Our net interest margins have held up well, expanding by 5 basis points year-over-year on a consolidated basis, including the securities segment and 9 basis points at the Bank excluding H&R Block, even though we must focus on increasing loan growth coming out of the first quarter holiday season. Deposit competition remains high across the industry and a flat yield curve has generally created downward pressure on net interest margin for many banks. We continue to work proactively on the asset and funding side to support an annual net interest margin in the 3.80% to 4% range irrespective of what the Fed may do the rest of calendar 2019.

The 2018 and 2019 tax season marks the fourth year of our seven-year partnership to provide various banking and payment services to H&R Block clients and the second year that we are the exclusive provider of interest free refund advance loans. In the quarter ended March 31, 2019, we originated approximately $1.16 billion of refund advance loans, up approximately 7% from the $1.08 billion we originated in the prior year. We received fees from H&R Block based on the principal amount of refund advance loans we originate, while we recorded as net interest income in the quarter ended March 31st. As of last Wednesday, less than $20 million of refund advances were outstanding. Consistent with prior years, we will generate additional fee income in the June quarter for refund transfer and Emerald Cards. We are pleased with the execution of yet another successful tax season with H&R Block.

Our capital ratios remained strong, despite recent actions to deploy some of our excess capital into accretive M&A transactions. Our Tier 1 leverage ratio was 9.25% of the holding company and 8.68% at the Bank at March 31, 2019, well above our required regulatory capital thresholds. Once the majority of the tax related excess liquidity leaves our balance sheet, our capital levels will be even higher. Our priorities for access capital have not changed. We will continue to fund organic growth and investments in our business and consider opportunistic share repurchase and accretive M&A.

I'd like to close by discussing our overall strategic vision and operating model in light of recent acquisitions and strategic investments. We are committed to having a strong consumer and small business bank, a commercial bank and a securities business. With respect to our consumer business, we have a variety of profitable niches that we continue to focus on growing individually, jumbo and agency mortgage lending, auto, unsecured lending, retention of servicing rights, small business and consumer banking. We also have a variety of unique sources of customer acquisition in each of these businesses, including our partnerships and outstanding relationships. As each of these businesses individually grow, we will utilize our proprietary platform to centralize the vast majority of interactions with our customers and small business lending and deposit customers to enhance the customer experience and reduce operating costs.

As this group of customers grow, we will utilize our evolving personalization engine to target this growing group of customers with an expanding product suite, which will include digital wealth management and eventually online trading. We launched this platform only a month before we closed the Nationwide acquisition and then followed it with a second acquisition only a few months later. We are all working hard to bring this vision to fruition. This strategy provides the best way to monetize consumer and small business customer acquisition costs over time in a fully digital model that is not dependent upon physical presence.

On the security side of the business, we will be primarily focused on serving small to medium sized broker dealers and RAAs with clearing and custody services, but integrate the best-in-class banking platform and account opening platform to ensure these companies can remain competitive in the digital arms race. The development required to build a consumer platform overlaps significantly with the business to a business platform required for the end client experience at Axos Clearing's clients. These firms will benefit from our technology, the customer attention derived from the easy access to banking products, clearings firms responsive to their needs and we will benefit from a cost effective model for customer acquisition and capital efficient fee revenue generation.

Our commercial business is also technology and software focused, serving specific industry verticals that we have selected either for their risk return profile or their needs for specific technology. We have a number of industry verticals that we are excited about, which we believe will supplement our loan growth and reduce our deposit cost over time. We believe we can operate this model with a limited office locations we have discussed already to allow our team members, many of whom are already present in these locations to better collaborate with one another. Capital deployment to grow existing and new businesses, infrastructure and technology investments, such as UDB, strategic partnerships like H&R Block and Nationwide and acquisitions such as the addition of Axos Fiduciary Services and COR all go hand-in-hand with this long-term strategy to further diversify and expand our product capabilities, distribution channels and revenue sources.

As we become a larger institution and more traditional and non-traditional competitors encroach on various parts of the overall financial services value chain or act for a period of time and in a rational manner, it'll be even more important to have multiple levers and revenue streams from which we can generate good risk adjusted returns and be able to monetize the cost of customer acquisition over a broader range product sets in a fully digitally enabled manner, so that we can give customers a better value proposition.

Not all of these businesses will have similar growth rates in different phases of the credit cycle. Operating efficiency ratios and return profiles on a stand-alone basis and various investments will reach optimal profitability levels faster than others. Ultimately, what is of most importance is that we continue to improve our products' capabilities and customer experience, so we will be able to create a sustainable competitive advantage in light of rapid changes in the competitive, regulatory and economic landscape. We firmly believe we have the right model for success and are more excited than ever to execute on the incredible opportunities that are in front of us.

Now, I'll turn the call over to Andy who will provide additional details on our financial results.

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Thanks, Greg. First, I wanted to note that in addition to our press release, our 10-Q was filed with the SEC today, which is available online through EDGAR or through our website axosfinancial. Second, I will highlight a few areas rather than go through every individual financial line item. Please refer to our press release or 10-Q for additional details.

For the quarter ended March 31, 2019, net -- our net interest margin was 4.82%, up 5 basis points from the quarter ended March 31, 2018 and up 95 basis points from the 3.87% in the quarter ended December 31, 2018. The March quarters include the seasonal impact of our co-branded H&R Block refund advance loans. As a result of the acquisition of COR Clearing this quarter, the consolidated net interest margin includes the impact of interest income from securities margin lending and interest expense to fund securities activities.

In our 10-Q filing this quarter, we have added a separate banking business segment calculation of our net interest margin. For the quarter ended March 31, 2019, the banking business segment net margin -- net interest margin was 4.94%, up 14 basis points from the quarter ended March 31, 2018 and up 104 basis points from the banking segment margin for the quarter ended December 31, 2018. The banking business segment net interest margin, when excluding the seasonal impact of H&R Block for the quarter ended March 31, 2019 was 3.90%, up 8 basis points from the quarter ended March 31, 2018 and up 9 basis points from the banking business segment net interest margin for the quarter ended December 31, 2018. Despite continuing deposit competition, we had solid improvement in our Bank net interest margin.

As I indicated, the consolidated net interest margin for the quarter ended March 31, 2019 was 4.82% and the banking business segment net interest margin for this quarter was 4.94%. The 12 basis point decrease between the consolidated net interest margin and the banking business segment net interest margin is the result of interest expense on our subordinated debt issued at Axos Financial parent, which reduces the margin by 3 basis points and the remainder of the decrease of 9 basis points is the result of interest income and interest expense attributable to the securities business segment.

Secondly, our credit quality remains strong with 4 basis points of net charge offs down from 6 basis points for the quarter ended December 31, 2018 and a non-performing asset to total asset ratio of 48 basis points this quarter down from 53 basis points in the linked quarter. In the quarter ended March 31, 2019, as Greg shared earlier, we originated approximately $1.16 billion of refund advance loans, up approximately 7% from the $1.08 billion we originated in the prior year. Related to the increase in refund advance loans this quarter is an increase in the loan loss provision to $19 million up from $16.9 million in loan loss provisions for the quarter ended March 31, 2018. Of the $1.16 billion of refund advance loans funded during the quarter, we reserved 1.3% of the total originations yielding a loan loss provision of $15.1 million included in the other loan category this quarter. Last year, we funded $1.1 billion and reserved 1.3% of the total originations for a loan loss provision of $14.1 million. The credit performance of the refund advance loans this year is in line with our expectations.

Shifting now to the balance sheet, our total assets increased $1.336 billion to $10.9 billion as of March 31, 2019, up from $9.5 billion at June 30, 2018. Of that increase, $569 million was a result of our acquisitions this quarter. The loan portfolio increased $666 million on a net basis from our portfolio loan originations of $2.5 billion. Investment securities increased $38.9 million primarily due to purchases net repayments.

On the liability side, total liabilities increased by $1.257 billion to $9.836 billion at March 31, 2019, up from $8.579 at June 30, 2018. The increase in total liabilities resulted primarily from $543 million form our acquisitions. Net growth of deposits yielded $671 million of growth. These growth items were partially offset by a decrease in FHLB borrowings of $13.5 million. Stockholders' equity increased by $79 million to $1.39 billion at March 31, 2019, up from $960 million at June 30, 2018. The increase was the result of our net income for the nine months, which was $114.5 million offset primarily by purchases of treasury stocks. As Greg noted, the Bank is very well positioned from a capital perspective. Tier 1 capital was 9.25% for the holding company and 8.68% for the Bank at March 31, 2019.

With that, I'll turn the call back over to Johnny.

Johnny Lai -- Vice President, Corporate Development and Investor Relations

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

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now be conducting our Q&A session. (Operator Instructions) Our first question comes from the line of Austin Nicholas from Stephens. You are now live.

Austin Nicholas -- Stephens -- Analyst

Hey, guys. Good afternoon.

Gregory Garrabrants -- President and Chief Executive Officer

Good afternoon.

Austin Nicholas -- Stephens -- Analyst

With the core NIM up nicely to the 3.90% level when you back out kind of the non-banking related businesses, is it fair to say that we could see that and margin kind of holding here in that mid -- kind of that mid -- 3.90% range? And I guess, what would maybe get you to the low -- back to the low end of that 3.80% to 4% and what would get you to the high end of the 4%, 3.80% to 4%?

Gregory Garrabrants -- President and Chief Executive Officer

I think it depends on the mix of the loan growth that we have going forward to the extent that loan growth continues to be focused in the C&I vertical area, including equipment leasing, which is having a good quarter this quarter that that will boost loan yields. If single-family rebounds some, we believe it will rebound some this quarter. But if it becomes a larger portion of growth, then I think the lower end of that range is probably more likely. So that's I believe the biggest element that we have. And then the other component of course would be how successful we are with some of the new commercial deposit teams that we have. And frankly, the the pipelines look exciting for those teams. They've really in one case one team just landed about six weeks ago and they have a very nice pipeline. The commercial banking transitions take some time, but those would also, if they come to fruition, would help us keep our NIM in the high end of the range.

Austin Nicholas -- Stephens -- Analyst

Got it. That's really helpful. Thanks, Greg. And then maybe just on the deposit side of the question. You had another -- you got a nice quarter of bankruptcy related deposits move over to the Bank. I guess, maybe, can you remind us of what maybe total percentage of deposits that you've brought over so far of the kind of the total pie that's in that business right now? And then maybe just kind of remind us of the outlook for what you're seeing there and then kind of any thoughts on if you're seeing any pick up in those deposit flows, given maybe some increases in bankruptcies you're seeing as of late?

Gregory Garrabrants -- President and Chief Executive Officer

Yeah. There -- we haven't seen a lot on an aggregate basis yet of pickups in the overall balances there, although we are seeing some success at -- in some of our initiatives with respect to the non-Chapter 7 space with SEC receivers and some things like that, but they're still not of the size we'd like. Epiq had 800-ish of deposits and the -- and we have a good trustee pipeline that side that's continuing to transition and the pipeline continues to really be dictated more by our capacity to bring the trustees over and gets them set up in the system than anything else. So we expect that we'll have more transition of deposits in this quarter. We are having more transition of deposits. And I think that it probably will take a little bit more of an aggregate pickup in bankruptcy activity for us to necessarily see those balances start to meaningfully increase from an aggregate perspective. We have about 40% of the market, so obviously to the extent that that increase actually occurs, we should see some of it.

Austin Nicholas -- Stephens -- Analyst

Got it. That makes a lot of sense. And then maybe just one last one. On the, call it, 11% or so of prepaid deposits, any update on kind of the strategy with that business and kind of any thoughts on the impact as you cross $10 billion?

Gregory Garrabrants -- President and Chief Executive Officer

We're still working on it -- we're still working through that with our partners, we're engaged with them as to exactly how to work through the different components of that business. It's interesting we're also still frankly having clients interested in us issuing for them as well. So it's -- we're working through that with them. And when we get it, definitively work through we'll definitely talk about it.

Austin Nicholas -- Stephens -- Analyst

Got it. Sounds great. Thanks, guys. Thanks for taking my questions.

Gregory Garrabrants -- President and Chief Executive Officer

Thank you.

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Andrew Liesch through Sandler O'Neill. You're now live.

Andrew Liesch -- Sandler O'Neill -- Analyst

Hey, guys.

Gregory Garrabrants -- President and Chief Executive Officer

Hi, Andrew.

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Hey, Andrew.

Andrew Liesch -- Sandler O'Neill -- Analyst

Greg, you talked about opening up a New York office. Can you just explain more of the rationale on that?

Gregory Garrabrants -- President and Chief Executive Officer

Sure. So there's really three rationales. First, our loan portfolio size has gotten to the point there, where we have enough individuals who are acting on our behalf out there and employed there that I think it makes sense to have a -- it's a reasonably sized -- reasonably small sized geographic presence. The second is that for the securities business, we have personnel out there now and are adding a few folks -- looking to add a few folks on the sales side there. And that's more fertile territory. Omaha, where the location of Axos Clearing is is good for operations. And then finally, we also added a commercial banking team there to service not only our existing clients, but a specific industry vertical where that -- which was the group that I was talking about, where the pipeline is looking good. So we've -- frankly when we've gone out and -- we have a very nice and sophisticated treasury management platform we've developed over time and we have a lot of sophisticated and large clients in New York who have been willing to move deposits our way, but they have wanted some sort of -- even if it's something central to some folks out there in order to do that. So the physical location presence is that we have ended up with from the commercial banking side are dictated -- our Orange County, Los Angeles and New York and they've been dictated partially by talent that we need in those geographies. Our existing loan books, which are strong in all three of those areas and then by clients that, on the commercial side, have wanted folks in market.

Andrew Liesch -- Sandler O'Neill -- Analyst

Okay. And then just on overall expenses, I know you provided a break out of your expectation for the efficiency ratio for both the banking segment and the securities business. But I guess -- am I reading this correctly that the efficiency ratio on a combined basis should not be higher than your previous thoughts as with some of the build out of the risk controls associated with the clearing business?

Gregory Garrabrants -- President and Chief Executive Officer

I think the -- I think with respect to the loan growth side on single-family, we're forecasting that that's going to be a little bit lower than I think maybe you guys might have had. We're set to adding expenses beyond the base from -- that we have now from our perspective of significant additional investments. We actually are pretty well suited right now for what we need to do. We may get a few people here and there, but I think we're actually in a pretty good place and we have the developers we need, we've got pretty much most of those folks we need. I think it's more with respect to what we're looking at with that, with the clearing side, maybe derisking it a little bit and some of that occurring and just focusing on the risk management side very intently is just maybe going to delay a few of the revenue based opportunities and some of the client opportunities that we have. We're still focused on them, but we just have to make sure that we're incredibly solid on the risk side there.

Andrew Liesch -- Sandler O'Neill -- Analyst

Okay. Thanks. I'll step back.

Operator

Thank you. Our next question comes from the line of Michael Perito from KBW. You are now live.

Michael Perito -- KBW -- Analyst

Hey. Good afternoon. Thanks for taking my questions.

Gregory Garrabrants -- President and Chief Executive Officer

Hey, Mike.

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Hi, Michael.

Michael Perito -- KBW -- Analyst

I had a few things I wanted to hit. I want to maybe ask the efficiency question a bit differently. Based on your prepared remarks and the partial, I think it was two of the three months contribution from the COR transaction. Andy, can you maybe just give us a little more color or some specific thoughts about where you think that the expense figure could trend in the fiscal fourth quarter as we start to think out toward fiscal 2020 here? It seemed like there are maybe a couple items that -- outside of the stuff you highlighted that might have still been elevated, I'm just trying to get a better sense of what the full run rate will look like as we move into the end of the year.

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Sure. Yeah. No -- yeah. No, when you look at the one-time items that are identified, the one area where we will continue to have a little bit of growth is in depreciation and amortization as we add in more items for amortization of intangibles. You can expect increase of around a $1 million associated with the amortization over the next quarter or so as we look at that. The -- what -- the non-one-time items, the -- we had about a $1 million charge for the MSR, that MSR was the result of treasury's diving at the end of the quarter. I don't think we're going to see that happen in the short-term over the next couple of quarters, so I wouldn't expect that level of an MSR writedown for that item. So I would expect that to come back up as a result of those details for that. We are adding more office expense over the next couple of quarters, so you'll see rather, not huge amounts, but smaller amounts associated with the office expense running maybe $300,000, $400,000 over that quarter. So those are the primary items that we've involved. As Greg mentioned when looking at the overall business on the security side, we want to make sure that our risk-based systems and everything are in solid shape. So we may have to invest in the security side of the business. That's why we've guided the efficiency ratio that we did in the security side of the business. So we'll have some pluses, we'll have some minuses. But in general, the guidance Greg gave in the prepared remarks is where you should focus.

Michael Perito -- KBW -- Analyst

Okay. Helpful color. Thank you. I have just two more things I want to touch on. One, on post gearing, the loss experience in the quarter, can you help us kind of grapple our hands around what the risk profile of that business looks like? Is that loss kind of indicative of where the risks are in that business and we could expect, maybe of not that magnitude, but if there are losses in that business, they'll look like something similar to what happened or was that kind of an extreme circumstance and we should be thinking about the risk profile of the business differently?

Gregory Garrabrants -- President and Chief Executive Officer

Yeah. That's a great question. So the vast majority the business, 88% plus of the business is a straightforward service to retail clients. This particular customer was a market maker. And so it's not that the profile of the customer, first of all, is different than the vast majority of the customer profiles. That -- the particular individual as well engaged in a deliberate subversion of the risk systems in a sophisticated way to avoid the activity being caught. That being said, there are ways that that activity could have been caught with enhanced systems, which we will ensure we have. And to put this in perspective, lucky us, this business has been in operation since the time it was in Mutual of Omaha and gets 30-ish years. I think they've lost around $20,000, $30,000 total with respect to similar types of losses. So this was something that was very unique, had not remotely happened closely before in decades of history and required a set of intentional acts that were beyond what we -- what should have occurred. Now, that being said, it doesn't mean that it's -- that there's not potential to ensure that it doesn't happen again, even if you experience similar sorts of behavior. So yeah, I think that -- the answer to that would be we certainly don't expect that and will ensure that the risk systems or the risk profile of the clients or both would ensure that that doesn't happen and there's a lot of work being devoted just to ensuring that a bad actor can't do those sort of things again.

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

And if I could just add?

Michael Perito -- KBW -- Analyst

Yeah. Go ahead.

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Well, I think that covers it.

Michael Perito -- KBW -- Analyst

Thank you for that, guys. Appreciate it.

Gregory Garrabrants -- President and Chief Executive Officer

Sure.

Operator

Thank you. Our next question comes from the line Steve Moss with B. Riley FBR. You are now live.

Steve Moss -- B. Riley FBR -- Analyst

Good afternoon. I just want to bump on the loan side here. Just two things, just wondering, what were overall origination yields for the quarter and what was the rate on that you're seeing for jumbo single-family resi mortgages these days?

Gregory Garrabrants -- President and Chief Executive Officer

Yeah. The rate on the jumbo single-family side and new origination side is between 5.25% to 5.50%-ish range. And then Andy, I don't if you've got that number handy?

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Yeah. I can give you the kind of the overall without Block. Loan rate is 5.53% for the bank segment for the quarter.

Steve Moss -- B. Riley FBR -- Analyst

Okay, that's helpful. And then in terms of the puts and takes within the portfolio, you guys mentioned that lender finance book was under pressure. Just wondering, what's driving the payoffs there? Conversely, you did see some pretty good commercial real estate multifamily growth. And just what are you seeing there in terms of opportunities?

Gregory Garrabrants -- President and Chief Executive Officer

I think with respect to any pressure on lender finance is related primarily to advance rates and deal structure that we're -- won't be as competitive and -- but I think that that business actually -- frankly, we have a decent pipeline there and I think that's actually looking fine. I don't think we'll be -- I think we'll be able to increase balances in that segment broadly on a continual basis. I just -- we've had to -- it's a little bit lumpy, just given that the size of the deals. And I think those other businesses have good pipelines. And even single-family is not doing terribly, it's just not going to be -- it's going to be, we think, in the more $300 million to $325 million range just not as high unless we sort of shift to more of a conduit style gain on sale model just given some of the non-bank competitors and where they are on an LTV perspective and think that's just not where we're going to put on our balance sheet. But I think most of the businesses actually are actually looking pretty good. I mean, leasing is having a great quarter. I think we'll be OK from this -- it's always -- one of the things about that January-February timeframe is that it was a fairly turbulent time then you put the holidays on top of it. So just the activity levels felt a little differently and a lot of the folks that we work with particularly on the fund side, there's a lot of our partners in these deals, there just -- there was just an air of distraction that was a little bit different and it's definitely calmed down and people are focused and things are just feeling more normal.

Steve Moss -- B. Riley FBR -- Analyst

Okay. And then just on the commercial real estate side, just seems like you've been growing that business at a pretty steady state. I believe it's mostly small balance. So just wondering, where you see the opportunities in the market?

Gregory Garrabrants -- President and Chief Executive Officer

Yeah. I think it's -- the multifamily small balance and small balance commercial have sort of similar profiles in the sense that they're coastal markets infill areas with generally good debt service covers and they're -- and we have a pretty decent sized client base that we've been working with there. And as we've gotten I think more sophisticated with our treasury management services, there's been a lot of cross-selling going on there and we also can add some other products for those customers, so they'll come to us for a line of credit that allows them to place assets online, so they can opportunistically acquire and then they can flip those loans into the five-year arm loans and more permanent financing off those lines into the -- into a more permanent product. And so I think we have a pretty good range of services that we can provide now to real estate investors and I just think that that client base is growing and I think we have a decent understanding of how to serve those clients and I think it's paying off.

Steve Moss -- B. Riley FBR -- Analyst

Okay. And one last question just on capital here, it looks like you guys did not repurchase any shares during the quarter. Just wondering any updated thoughts on that.

Gregory Garrabrants -- President and Chief Executive Officer

No, we didn't repurchase any shares in the quarter. It was a fairly busy quarter just with respect to all the acquisitions closing and that sort of things. And so it's either going to be that obviously we look at our loan growth and we look at the capital required in order to facilitate that loan growth. And if capital ratios start to demonstrate that there's excess capital, then we will clearly be looking at the share price and determining whether we think it's right to repurchase shares. So I think the good part of the model is that we have an ability to -- obviously, if we have a return on equity that we believe is going to be above even slightly our loan growth. And as we get fee income for businesses that are more capital efficient, we'll have excess capital that we can deploy. And so I think we have to go through and see how our loan growth goes and continue to look at that.

Steve Moss -- B. Riley FBR -- Analyst

All right. Thank you very much.

Gregory Garrabrants -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Scott Valentin from Compass Point. You are now live.

Scott Valentin -- Compass Point -- Analyst

Thank you. Good afternoon. Thanks for taking my question. Just -- Greg, you made some comments about jumbo originations being down. I think you mentioned the volatility in the market earlier in the quarter. But also wondering, if the tax law change regarding SALT had any impact in our Northeast 16, anecdotally some declining jumbo home prices, just wondering, if that had maybe any impact on origination volumes and if you expect any impact going forward?

Gregory Garrabrants -- President and Chief Executive Officer

Yeah. I think it's definitely possible. And I do see a differential impact between the West and the East Coast generally, particularly in the Hamptons, Connecticut area, things like that. We're being quite conservative there because we don't trust the valuations on some of those homes and I think I don't have data on it, but I do believe that there is some measurable impact associated with people saying, well, I just -- why should I continue to bother with this in a state that is disrespectful of my productive activity. So I don't have any kind of way of actually quantifying that other than to say that anecdotally I do see it and I also see it -- what's interesting, a differential impact, apparently differential impact in the East and West Coast, although, again, it depends on the market. Frankly, Los Angeles and that area is still doing pretty well, it's sort of maybe a little bit less frothy from a standpoint of price increases and then there are certain other areas, where you definitely I think see the prices topping out, see some weaknesses, see some concerns in certain markets. So yeah, I think that's a fair point.

Scott Valentin -- Compass Point -- Analyst

And then just in response to that, have you guys adjusted your underwriting at all, it sounds like maybe in -- on -- in East Coast you have maybe lower LTV requirements or something like that?

Gregory Garrabrants -- President and Chief Executive Officer

Well, I mean, we've always been very conservative on our LTV requirements. It really is more about not increasing them. I mean, we're very low on our loan to value ratios. And when we look at larger homes, we're looking at these often on an exception basis and our LTV standards are in the 50% or sub-50% range. So I think it's more about the -- that ends up getting reflected in the appraisals and our adjustments have really been an unwillingness to match what we see is some fairly aggressive lending outside of -- mostly outside of the bank environment.

Scott Valentin -- Compass Point -- Analyst

Okay. Fair enough. And then just another question regarding credit. You mentioned I think in the response to the NIM question, as of -- if C&I grows and the commercial grows as a percent of portfolio that's positive for NIM. But wondering, how to think about provision expense going forward, given I would think those types of credits carry a little more risk than the residential credits?

Gregory Garrabrants -- President and Chief Executive Officer

Well, it's interesting. I think we end up reserving more for them. I think the question of whether they actually carry more risk in the way that they're structured depends. I think it's probably true on the leasing side that they do carry more risk. And I think in the structured transactions with large subordinate partners, I'm not so sure about that. But in any event, as -- it -- when the C&I mix goes up, the provision cost will go up commensurately with it.

Scott Valentin -- Compass Point -- Analyst

Okay. All right. Thanks very much.

Gregory Garrabrants -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Edward Hemmelgarn with Shaker investments. You are now live.

Edward Hemmelgarn -- Shaker Investments -- Analyst

Yes. Just have several questions. On the WiseBanyan acquisition, I think you talked about it being a -- forecasting $3 million to $4 million loss, I'm assuming for calendar 2019 or is that just for this year?

Gregory Garrabrants -- President and Chief Executive Officer

They're running probably in what we're going to put into it. They're running around more $3.50-ish million of a loss per quarter. All right. So that -- if we -- what we're assuming is that we put some marketing against this. And then as that marketing has lags associated with the customer acquisition, so that's probably a conservative number and obviously where this is -- it's -- this is a transitional timeframe for them as we -- calling it an acquisition is fine in the sense that we did get a customer base and we hired a small team of people. But the reality of it is it was sort of an acqui-hire with a nominal cost of acquiring a technology that cost 10 times what we bought it for the build. So that's going to -- that's about the negative run rate right now currently on the operating side.

Edward Hemmelgarn -- Shaker Investments -- Analyst

Well, how are you generating revenues to offset the OpEx?

Gregory Garrabrants -- President and Chief Executive Officer

The -- so right now, currently, the model is that folks are coming in and have a basic level of service for no cost and then they subsequently upgrade to a set of other products within the platform for which they pay a monthly fee. The plan is to integrate the product such that folks that are getting a checking account are able to get the services for sets of prices that are different than folks that don't have the checking and other relationships with the institution. The -- their cost of acquisition with respect to customers is significantly lower than the cost experienced by folks chasing checking accounts and so their cost of acquisition is great and we believe that we'll be able to integrate those products. So that's the primary way we're focusing in this next six-month period of time is driving those customers through to UDB, cross-selling them the checking account and making money from that. They have a very good level of uptake with respect to the number of customers that they have that actually subscribe to premium services over time . So there's sort of this trade off with respect to the customer acquisition and the immediate monetization of the customer. And so at the level that we're looking at this, we are interested in trying to see how well we can generate checking accounts at a low customer acquisition cost through this model. And I will say that even because we have not lost, Ed, our focus on frugality and efficiency, the -- those folks there are also helping across a variety of initiatives, including the personalization initiative and a variety of other initiatives. So that the net effect is a set of very smart folks who are adding a lot of incremental value across a variety of projects. And so how do you quantify that? You could -- you can do it, it's a little bit harder. But for example, currently in order to board customers at Axos Clearing, there's lots of systems integrations that need to occur. Well, the way that that needs to happen is through a middleware API layer, which they are building. So if that will benefit from an eventual movement to vertically integrate and reduce the cost associated with the clearing side, but what it will also do is enable us to much more rapidly board customers into COR. So that's -- so it's -- we're definitely utilizing all those resources and that's one of the reasons why I'm reasonably confident that even though the strategy is relatively complex that we don't need to add a lot more folks, we may need to add some people here and there, but we don't need to add a lot more folks because we got some good talent there and they can be leveraged in some pretty interesting ways.

Edward Hemmelgarn -- Shaker Investments -- Analyst

What is your timetable to reach breakeven?

Gregory Garrabrants -- President and Chief Executive Officer

12 months.

Edward Hemmelgarn -- Shaker Investments -- Analyst

12 months. Okay. Can you elaborate a little bit more on the loss at COR Clearing? I mean, it still is -- we've...

Gregory Garrabrants -- President and Chief Executive Officer

No, I'm not going to allow -- yeah, I'm not going to elaborate more on it because we are involved in multiple litigations and I would say that if you're interested in seeing collaborations on it, there's public court documents with respect to our complaints and what we're going to be doing. So I won't be saying any more about it at this time.

Scott Valentin -- Compass Point -- Analyst

Okay. And lastly just in terms of, I think you highlighted in your release that the acquisition-related cost was about $2.5 million for the quarter. Specifically, I mean, it was most of that in -- or was all of it in other general and administrative or was it (inaudible)?

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Yeah. So the -- when you break it down, about $283,000 was in professional services, $1,266,000 was in depreciation and amortization, for the Bank $384,000 in depreciation and amortization for the security side, $55,000 was in other G&A and then $523,000 was actually in compensation expense.

Gregory Garrabrants -- President and Chief Executive Officer

Which includes folks that are moving on and those sorts of things.

Edward Hemmelgarn -- Shaker Investments -- Analyst

But the depreciation and amortization is a permanent expense?

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

It's not permanent I think, but it will recur and will, as I mentioned in my remarks, there will be an increase in the amortization associated with intangibles because obviously we've just acquired a number of businesses, we have not fully run through a full year of deployment of those intangibles as well as amortization of those pieces. So yes, there will be some increase in that.

Edward Hemmelgarn -- Shaker Investments -- Analyst

I guess, I'm just trying to understand what's one-time and what is ongoing? You noted the -- you talked about $2.5 million, usually people refer to that acquisition as more of a one-time thing. How much was...?

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Sure. So it's -- so $1.6 million of that would be of the amortization flavor.

Edward Hemmelgarn -- Shaker Investments -- Analyst

But the -- but I mean, also the -- is the -- the personnel cost, is that done with now?

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

No. No, that would be one-time.

Edward Hemmelgarn -- Shaker Investments -- Analyst

Okay. Okay. Thanks.

Operator

Thank you. Our final question is a follow-up from the line of Michael Perito with KBW. You're now live.

Michael Perito -- KBW -- Analyst

Hey, guys, thanks for the follow-up. I'll put a little quick trigger on the last time. Just really quickly on capital. Greg, appreciate your comments to the prior question. Just curious as you look at the capital ratios today, obviously, they're levered a bit from where they were 18 months ago after the acquisition activity and the organic growth. How do you view the capital ratios today in terms of kind of the balance sheet at the optimal point of leverage? I mean, is there still some excess today or do you think that these levels are pretty indicative of where you'd like them to be in kind of a steady state perfect environment?

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Right. Well, one of the elements you have to recognize in this quarter is that we do have seasonal deposits that impact the capital ratio. So when you look at -- let's say, you look at Tier 1 leverage ratio, it's absolutely impacted. I don't have -- probably 45-ish something like that basis points with respect to just excess deposits. So I do believe we have some excess capital today, but I think just -- it's probably more fruitful to just look at it on a going forward basis and think about differentials in loan growth versus ROE as really the primary way that capital is built. Yeah. The -- this quarter is a little strange when you look at the numbers. The other elements that we just have to be thoughtful about, which is as we -- one of the benefits that we've had is we've had a good mix of 50% and a 100% risk-weighted capital, which results in a very -- a pretty strong risk-weighted asset or risk-weighted capital ratio. And if the ratio of commercial goes up too much with respect to single and multifamily, which I'm expecting is actually not going to happen given that multifamily growth is reasonably good and we still expect some single-family growth, that could become a constraint at some point in the -- in time, although I don't foresee that in the next couple of years. So...

Michael Perito -- KBW -- Analyst

Helpful color. Appreciate you guys taking my questions. Thank you.

Gregory Garrabrants -- President and Chief Executive Officer

Thank you.

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Thanks, Mike.

Operator

Thank you. Ladies and gentlemen, we have no further questions in queue at this time. I'd like to turn the floor back over to Management for closing.

Gregory Garrabrants -- President and Chief Executive Officer

All right. Thank you, everyone. Appreciate your time. Talk to you next quarter.

Operator

Thank you. Ladies and gentlemen, this does conclude our teleconference for today. You may now disconnect your line at this time. Thank you for your participation and have a wonderful day.

Duration: 74 minutes

Call participants:

Johnny Lai -- Vice President, Corporate Development and Investor Relations

Gregory Garrabrants -- President and Chief Executive Officer

Andrew Micheletti -- Executive Vice President and Chief Financial Officer

Austin Nicholas -- Stephens -- Analyst

Andrew Liesch -- Sandler O'Neill -- Analyst

Michael Perito -- KBW -- Analyst

Steve Moss -- B. Riley FBR -- Analyst

Scott Valentin -- Compass Point -- Analyst

Edward Hemmelgarn -- Shaker Investments -- Analyst

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