And ultimately, the exit we decided to do was really based on when the SEC came out and essentially said that most cryptocurrencies were securities, and therefore, the exchanges would have to be licensed as securities exchanges. And so even though we were only doing operating accounts for these businesses, essentially allowing them to do payroll and whatever, and we weren’t doing any wallet transactions. We weren’t doing retail transactions. We just decided that it was, we wanted to pause until we got more regulatory clarity. And by the way, I don’t want what we did to disparage anyone particularly in the crypto business. There’s obviously good players and bad players in that business. And I would still retain the optionality at some point in time to look at some sort of involvement in the future.
But that would wait until we get better regulatory clarity around what the treatment of these exchanges are going to be and what’s the overall landscape so that there’s just more certainty associated with it. So we weren’t doing anything there until after Signature and Silvergate collapsed. We did some limited purpose accounts. The SEC kind of had their rulings. Obviously, they’ve been aggressive in that space, but then they’ve also kind of pushed back by courts in certain instances and things like that. But at the end, it was our own decision, and it was just in relation to what we saw, not anything particular with respect to us. And there’s nothing that’s impacting us with respect to this. This is just attempts by folks who are short at the stock to try to try to make something out of nothing.
And that’s why we said something about it.
David Chiaverini: Got it. Very helpful. And then I had a follow-up on the professional services expenses. You mentioned that it was related to the fiscal year-end process. I was curious, was any of it related to the latest release of UDB 2.0. Was there any capitalized software expenses in there? Anything of that nature? And is that being kind of amortized in and this is kind of a new run rate going forward?
Greg Garrabrants: There’s always some kind of level. But now the capitalization that will be amortized comes through the depreciation and amortization line. So that will be recognized going forward. I forget candidly, whether there was 1/3 of it in the September quarter. That wasn’t in the professional services line. The professional services had a couple of insurance reimbursements in prior quarters. related to legal matters. This quarter, the primary thing related to the year-end activities was that we have our audit that occurs over the July and August period. So there’s always not only the audit fees, but then there’s the tax work and the legal work that goes in mind with it. So it usually causes a slight blip up during that September quarter when you look at it kind of almost a slight seasonality to it.
David Chiaverini: Got it. Thanks for that. And then the last one for me is a follow-up on the credit quality questions on the special mention in the substandard. I was curious, any common themes that you’re observing? Is it that lease-ups are going slower than expected? Or is it really driven by higher rates and pressure on DSCR. Any common themes that you’re observing?
Greg Garrabrants: Not really. It’s fairly idiosyncratic. I mean I think it’s really pretty de minimis, and it’s nothing, it’s a very small amount. And frankly, if you look at it, it’s a little bit up from the prior quarter, but it’s down from a year ago, right? So if you look at NPLs, for example, single-family is down significantly from last year. And so they really are idiosyncratic with respect to just different elements. I mean I do think that I think the office sector is under pressure, but I think fundamentals in multifamily and industrial and lease-up activity in Industrial looks fantastic. Condos are still selling very, very well. Single-family is still holding up. So I think all of the fundamentals are, I think, definitely pretty good. We don’t really see some sort of deterioration on the operating or cash flow side of any significance, really.
David Chiaverini: Great. Thanks very much.
Greg Garrabrants: Thank you.
Operator: The next question comes from the line of Gary Tenner with D.A. Davidson. Please proceed with your question.
Gary Tenner: Thanks. Good afternoon. I want to ask a little bit about the Advisory Services business and the white label banking, I know you kind of mentioned it a bit in your prepared remarks, Greg. But I think during the quarter, there was a report of the sizable adviser network that was going to move over to Axos lease part of their business. And I know over the last couple of years, you’ve talked a lot about kind of going after some of these larger RIAs, et cetera. So just looking for any sort of thoughts around kind of how that pipeline and how that sales process is developing and as you look out over the next 12, 18 months or pick a time frame, any thoughts on how much growth you could see in that business?
Greg Garrabrants: Right. The pipeline of new advisers and those joining are very good. The net I would say was not magnificent this quarter in comparison with what it should have been given the amount of new clients we won. What happened in that is that the legacy business has some pretty significant TAMs in it. And those TAMs, we’re seeing them have net asset losses as advisers break away. And so what would have been, I think, a very nice quarter of asset growth in that AES business ended up being still a net growth, but I would say relatively mediocre in comparison with what I would like to see, but the pipeline is really good, and the activity is great. And so I think the question, which I have a hard time being able to be able to estimate is how much of the existing business on that TAM side is kind of moving around.
And that’s what’s kind of keeping growth down right now. What I’m hopeful happens is that, that there’s frankly, the performance on that side for a lot of those guys, that’s kind of driven certain things. It’s obviously idiosyncratic to each TAM, but that’s what’s really going on. So back to the question of what that looks like. I think conservatively, we ought to be able to do several billion dollars of growth in the remaining several quarters on a net basis, that probably looks more like four or five on a gross basis, which is nice. And if you could get four to five and getting to six on a net basis, then that would be a really nice kind of run rate. I’ve told the team that I’d like to see them and kind of staff the sales function to double that business in the next five years.
And the conversations are great. We had our client advisory board where we released our demo and our first operational white label platform that has on the app that has the advisory side of the banking together had great feedback on it. People are excited to get using that. So that will start happening in the first quarter of the next calendar year. So there’s a lot of good things happening. The activity is really good. And when I was sitting around with the head of that business, I said, well, gee, it looks like your sales are great, but you got to figure out how to deal with the back door. I think that will that on a turnaround hopefully. But it’s hard to say with respect to whether it will and how many more quarters that will go on.
Gary Tenner: I appreciate the color. And so you’re saying, though, on the white label banking side that you expect to have RIAs live on that in the first quarter of ’24?
Greg Garrabrants: Yes, I do. And then what will happen with that, as I say, by the end of first quarter of ’24, every new account will be offered a bank account, and that bank account will come with the advised account, and there will be significant benefits associated with having that account together such as the ability to immediately deposit a check and have it available that instant. Where we have other elements on the platform that are going to take a while longer, securities-based lines of credit, which we want to be one click securities based line of credit, securities-based credit cards, things like that. And those are in the works. But there’s a lot of wood to chop there.
Gary Tenner: Thank you.
Greg Garrabrants: Thank you. Thanks Gary.
Operator: Thank you. We’ve reached the end of the question-and-answer session. I’ll now turn the call over to Johnny Lai for any closing remarks.
Johnny Lai: Great. Thanks, everyone, for your interest, and we’ll talk to you next quarter. Thank you.
Operator: This concludes today’s conference. Thank you for your participation. You may now disconnect your lines at this time.
