8-K
Axos Financial, Inc. (AX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 27, 2022
Axos Financial, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 001-37709 | 33-0867444 |
|---|---|---|
| (State or other jurisdiction of<br>incorporation) | (Commission File Number) | (IRS Employer Identification<br>Number) |
9205 West Russell Road, Ste 400
Las Vegas, NV 89148
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (858) 649-2218
| Securities registered pursuant to Section 12(b) of the Act: | ||
|---|---|---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common stock, $0.01 par value | AX | New York Stock Exchange |
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition
On October 27, 2022, Axos Financial, Inc. (the “Registrant”) issued a press release announcing its first quarter results of operations for the period ended September 30, 2022. The press release is furnished as Exhibit 99.1. In addition, the Registrant is furnishing the related quarterly earnings supplement in two different formats as Exhibits 99.2 and 99.3.
Pursuant to General Instruction B.2. of Form 8-K, the information in this Item 2.02 of Form 8-K, including Exhibit 99.1, 99.2 and 99.3 is being furnished pursuant to Item 2.02 and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise be subject to the liabilities of that section, nor is it incorporated by reference into any filing of the Registrant under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit | Description |
|---|---|
| 99.1 | Press Release |
| 99.2 | Press Release Earnings Supplement |
| 99.3 | Press Release Earnings Supplement PDF |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Axos Financial, Inc. | |||
|---|---|---|---|
| Date: | October 27, 2022 | By: | /s/ Derrick K. Walsh |
| Derrick K. Walsh | |||
| EVP and Chief Financial Officer |
Document
Axos Financial, Inc. Reports First Quarter Fiscal 2023 Results
LAS VEGAS, NV – (BUSINESS WIRE) – October 27, 2022 – Axos Financial, Inc. (NYSE: AX) (“Axos”), today announced unaudited financial results for the first fiscal quarter ended September 30, 2022. Net income was $58.4 million, a decrease of 3% from $60.2 million for the quarter ended September 30, 2021. Diluted earnings per share were $0.97, a decrease of $0.02, or 2%, as compared to diluted earnings per share of $0.99 for the quarter ended September 30, 2021.
Adjusted earnings and adjusted earnings per diluted common share (“adjusted EPS”), non-GAAP measures, which exclude non-cash amortization expenses and non-recurring costs related to mergers and acquisitions, and other non-recurring costs increased 15% to $71.6 million and 15% to $1.18, respectively, for the quarter ended September 30, 2022, compared to $62.2 million and $1.03, respectively, for the quarter ended September 30, 2021.
First Quarter Fiscal 2023 Financial Summary
| Three Months Ended September 30, | |||||
|---|---|---|---|---|---|
| (Dollars in thousands, except per share data) | 2022 | 2021 | % Change | ||
| Net interest income | $ | 180,475 | $ | 146,642 | 23.1% |
| Non-interest income | $ | 27,208 | $ | 26,702 | 1.9% |
| Net income | $ | 58,407 | $ | 60,210 | (3.0)% |
| Adjusted earnings (Non-GAAP)1 | $ | 71,615 | $ | 62,228 | 15.1% |
| Diluted EPS | $ | 0.97 | $ | 0.99 | (2.0)% |
| Adjusted EPS (Non-GAAP)1 | $ | 1.18 | $ | 1.03 | 14.6% |
| 1 See “Use of Non-GAAP Financial Measures” |
“We delivered another strong quarter, with double-digit annualized loan, deposit and book value per share growth,” stated Greg Garrabrants, President and Chief Executive Officer of Axos. “Net interest income increased 23.1% year-over-year, propelled by strong loan growth and net interest margin expanding on a consolidated and bank-only basis. Axos Securities continues to benefit from rising interest rates, with $3.3 billion of low-cost deposits and $8.9 million of pretax income. I am extremely excited about the future growth opportunities we have across our securities businesses.”
“We continue to generate profitable growth while maintaining strong capital levels,” stated Derrick Walsh, Executive Vice President and Chief Financial Officer of Axos. “Credit quality in our loan portfolio remains healthy with a non-performing loan ratio of 0.78%. Over the past year, we have demonstrated our asset sensitivity by expanding our net interest margin. We continue to invest prudently in existing and new businesses that will further diversify our loan, deposit and fee income capabilities.”
Other Highlights
•Net loans for investment totaled $15.2 billion at September 30, 2022, an increase of $1.1 billion, or 31.8% annualized, from $14.1 billion at June 30, 2022
•Total deposits totaled $15.2 billion at September 30, 2022, an increase of $1.3 billion, or 35.3% annualized, from $13.9 billion at June 30, 2022
•Net interest margin was 4.26% compared to 4.22% for the three months ended September 30, 2021
•Pretax income for the securities business segment was $8.9 million for the three months ended September 30, 2022, an improvement from a $0.4 million loss for the three months ended June 30, 2022
•Non-performing loans to total loans was 0.78%, down from 0.83% at June 30, 2022
•Book value increased to $28.35 per share, up from $24.52, an increase of 15.6% at September 30, 2021
First Quarter Fiscal 2023 Income Statement Summary
Net income was $58.4 million or $0.97 per diluted common share for the three months ended September 30, 2022, compared to $60.2 million, or $0.99 per diluted common share for the three months ended September 30, 2021. Net interest income increased $33.8 million or 23.1% for the three months ended September 30, 2022 compared to the three months ended September 30, 2021, primarily due to higher average balances and rates earned in the loan portfolio, partially offset by higher rates paid on deposits.
The provision for credit losses was $8.8 million for the three months ended September 30, 2022 compared to $4.0 million for the three months ended September 30, 2021 primarily due to growth in the loan portfolio and changes in loan mix.
Non-interest income increased to $27.2 million for the three months ended September 30, 2022 compared to $26.7 million for the three months ended September 30, 2021. Increases of $2.7 million in broker-dealer fee income and $1.7 million in advisory fee income were mostly offset by decreases of $1.9 million in mortgage banking income and $1.8 million in prepayment penalty fee income.
Non-interest expense, comprised of various operating expenses, increased $31.7 million to $116.1 million for the three months ended September 30, 2022 from $84.4 million for the three months ended September 30, 2021. The increase was primarily attributable to a $16.0 million accrual in the current quarter as a result of an adverse legal judgement that has not been finalized, increased salaries and related costs of $6.3 million, as well as higher professional services expenses of $3.5 million, advertising and promotional expenses of $3.0 million and data processing expenses of $1.9 million.
Balance Sheet Summary
Axos’ total assets increased by $1.0 billion, or 6%, to $18.4 billion, at September 30, 2022, from $17.4 billion at June 30, 2022, primarily due to an increase of $1.1 billion in loans held for investment. Total liabilities increased by $0.9 billion, or 6%, to $16.7 billion at September 30, 2022, from $15.8 billion at June 30, 2022, primarily due to an increase in deposits of $1.3 billion. Stockholders’ equity increased by approximately $58.0 million, or 4%, to $1.7 billion at September 30, 2022 from $1.6 billion at June 30, 2022. The increase was primarily the result of net income of $58.4 million.
The Bank’s Tier 1 capital to adjusted average assets ratio was 10.30% at September 30, 2022 compared to 10.14% at September 30, 2021.
Conference Call
A conference call and webcast will be held on Thursday, October 27, 2022 at 5:00 PM Eastern / 2:00 PM Pacific. Analysts and investors may dial in and participate in the question/answer session. To access the call, please dial: 877-407-8293. The conference call will be webcast live, and both the webcast and the earnings supplement may be accessed at Axos’ website, investors.axosfinancial.com. For those unable to listen to the live broadcast, a replay will be available until November 27, 2022, at Axos’ website and telephonically by dialing toll-free number 877-660-6853, passcode 13733311.
About Axos Financial, Inc. and Subsidiaries
The condensed consolidated financial statements include the accounts of Axos Financial, Inc. (“Axos”) and its wholly owned subsidiaries, Axos Bank (the “Bank”) and Axos Nevada Holding, LLC (“Axos Nevada Holding” and collectively, the “Company”). Axos Nevada Holding wholly owns its subsidiary Axos Securities, LLC, which wholly owns subsidiaries Axos Clearing LLC, a clearing broker dealer, Axos Invest, Inc., a registered investment advisor, and Axos Invest LLC, an introducing broker dealer. With approximately $18.4 billion in consolidated assets, Axos Financial, Inc. through Axos Bank provides consumer and business banking products through its low-cost distribution channels and affinity partners. Axos Clearing LLC (including its business division AAS), with approximately $30.3 billion of assets under custody and/or administration, and Axos Invest, Inc., provide comprehensive securities clearing and custody services to introducing broker-dealers and registered investment advisor correspondents and digital investment advisory services to retail investors, respectively. Axos Financial, Inc.’s common stock is listed on the NYSE under the symbol “AX” and is a component of the Russell 2000® Index, the S&P SmallCap 600® Index, the KBW Nasdaq Financial Technology Index, and the Travillian Tech-Forward Bank Index. For more information on Axos Financial, Inc. please visit investors.axosfinancial.com.
Segment Reporting
The Company operates through two segments: Banking Business and Securities Business. In order to reconcile the two segments to the consolidated totals, the Company includes parent-only activities and intercompany eliminations. Inter-segment transactions are eliminated in consolidation and primarily include non-interest income earned by the Securities Business segment and non-interest expense incurred by the Banking Business segment for cash sorting fees related to deposits sourced from Securities Business segment customers, as well as interest expense paid by the Banking Business segment to each of the wholly-owned subsidiaries of the Company and to the Company itself for their operating cash held on deposit with the Business Banking segment.
The following tables present the operating results of the segments and reconciliations:
| Three Months Ended September 30, 2022 | ||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (Dollars in thousands) | Banking Business | Securities Business | Corporate/Eliminations | Axos Consolidated | ||||||||||||||
| Net interest income | $ | 179,730 | $ | 4,275 | $ | (3,530) | $ | 180,475 | ||||||||||
| Provision for credit losses | 8,750 | — | — | 8,750 | ||||||||||||||
| Non-interest income | 10,712 | 29,165 | (12,669) | 27,208 | ||||||||||||||
| Non-interest expense | 100,796 | 24,515 | (9,224) | 116,087 | ||||||||||||||
| Income before taxes | $ | 80,896 | $ | 8,925 | $ | (6,975) | $ | 82,846 | Three Months Ended September 30, 2021 | |||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||
| (Dollars in thousands) | Banking Business | Securities Business | Corporate/Eliminations | Axos Consolidated | ||||||||||||||
| Net interest income | $ | 142,241 | $ | 6,176 | $ | (1,775) | $ | 146,642 | ||||||||||
| Provision for credit losses | 4,000 | — | — | 4,000 | ||||||||||||||
| Non-interest income | 14,828 | 13,106 | (1,232) | 26,702 | ||||||||||||||
| Non-interest expense | 62,725 | 19,273 | 2,433 | 84,431 | ||||||||||||||
| Income before taxes | $ | 90,344 | $ | 9 | $ | (5,440) | $ | 84,913 |
Use of Non-GAAP Financial Measures
In addition to the results presented in accordance with GAAP, this release includes non-GAAP financial measures such as adjusted earnings, adjusted earnings per diluted common share, and tangible book value per common share. Non-GAAP financial measures have inherent limitations, may not be comparable to similarly titled measures used by other companies and are not audited. Readers should be aware of these limitations and should be cautious as to their reliance on such measures. Although we believe the non-GAAP financial measures disclosed in this release enhance investors’ understanding of our business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.
We define “adjusted earnings”, a non-GAAP financial measure, as net income without the after-tax impact of non-recurring acquisition-related costs (including amortization of intangible assets related to acquisitions) and other costs (unusual or non-recurring charges). Adjusted earnings per diluted common share (“adjusted EPS”), a non-GAAP financial measure, is calculated by dividing non-GAAP adjusted earnings by the average number of diluted common shares outstanding during the period. We believe the non-GAAP measures of adjusted earnings and adjusted EPS provide useful information about Axos’ operating performance. We believe excluding the non-recurring acquisition-related costs, and other costs provides investors with an alternative understanding of Axos’ core business.
Below is a reconciliation of net income, the nearest compatible GAAP measure, to adjusted earnings and adjusted EPS (Non-GAAP) for the periods shown:
| Three Months Ended<br>September 30, | ||||
|---|---|---|---|---|
| (Dollars in thousands, except per share amounts) | 2022 | 2021 | ||
| Net income | $ | 58,407 | $ | 60,210 |
| Acquisition-related costs | 2,734 | 2,846 | ||
| Other costs | 16,000 | — | ||
| Income taxes | (5,526) | (828) | ||
| Adjusted earnings (Non-GAAP) | $ | 71,615 | $ | 62,228 |
| Adjusted EPS (Non-GAAP) | $ | 1.18 | $ | 1.03 |
We define “tangible book value”, a non-GAAP financial measure, as book value adjusted for goodwill and other intangible assets. Tangible book value is calculated using common stockholders’ equity minus mortgage servicing rights, goodwill and other intangible assets. Tangible book value per common share, a non-GAAP financial measure, is calculated by dividing tangible book value by the common shares outstanding at the end of the period. We believe tangible book value per common share is useful in evaluating the Company’s capital strength, financial condition, and ability to manage potential losses.
Below is a reconciliation of total stockholders’ equity, the nearest compatible GAAP measure, to tangible book value per common share (non-GAAP) as of the dates indicated:
| September 30, | ||||
|---|---|---|---|---|
| (Dollars in thousands, except per share amounts) | 2022 | 2021 | ||
| Common stockholders’ equity | $ | 1,700,972 | $ | 1,458,621 |
| Less: mortgage servicing rights, carried at fair value | 26,373 | 18,438 | ||
| Less: goodwill and other intangible assets | 160,429 | 164,944 | ||
| Tangible common stockholders’ equity (Non-GAAP) | $ | 1,514,170 | $ | 1,275,239 |
| Common shares outstanding at end of period | 59,998,673 | 59,494,633 | ||
| Tangible book value per common share (Non-GAAP) | $ | 25.24 | $ | 21.43 |
Forward-Looking Safe Harbor Statement
This press release contains forward-looking statements that involve risks and uncertainties, including without limitation statements relating to Axos’ financial prospects and other projections of its performance and asset quality, Axos’ ability to continue to grow profitably and increase its business, Axos’ ability to continue to diversify its lending and deposit franchises, the anticipated timing and financial performance of other offerings, initiatives, and acquisitions and expectations of the environment in which Axos operates. These forward-looking statements are made on the basis of the views and assumptions of management regarding future events and performance as of the date of this press release. Actual results and the timing of events could differ materially from those expressed or implied in such forward-looking statements as a result of risks and uncertainties, including without limitation uncertainties surrounding the severity, duration, and effects of the COVID-19 pandemic, Axos’ ability to successfully integrate acquisitions and realize the anticipated benefits of the transactions, changes in the interest rate environment, inflation, government regulation, general economic conditions, conditions in the real estate markets in which we operate, risks associated with credit quality, the outcome and effects of litigation and other factors beyond our control. These and other risks and uncertainties detailed in Axos’ periodic reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those expressed or implied in any forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and Axos undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this press release.
Investor Relations Contact:
Johnny Lai, CFA
SVP, Corporate Development & Investor Relations
858-649-2218
jlai@axosfinancial.com
The following tables set forth certain selected financial data concerning the periods indicated:
AXOS FINANCIAL, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Unaudited – dollars in thousands)
| September 30,<br>2022 | June 30,<br>2022 | September 30,<br>2021 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Selected Balance Sheet Data: | |||||||||
| Total assets | $ | 18,407,078 | $ | 17,401,165 | $ | 14,906,750 | |||
| Loans—net of allowance for credit losses | 15,211,573 | 14,091,061 | 11,879,021 | ||||||
| Loans held for sale, carried at fair value | 9,463 | 4,973 | 33,344 | ||||||
| Loans held for sale, lower of cost or fair value | 10,476 | 10,938 | 11,949 | ||||||
| Allowance for credit losses - loans | 155,472 | 148,617 | 136,778 | ||||||
| Securities—trading | 75 | 1,758 | 1,941 | ||||||
| Securities—available-for-sale | 257,634 | 262,518 | 135,996 | ||||||
| Securities borrowed | 87,622 | 338,980 | 457,282 | ||||||
| Customer, broker-dealer and clearing receivables | 410,842 | 417,417 | 427,169 | ||||||
| Total deposits | 15,176,631 | 13,946,422 | 11,747,442 | ||||||
| Advances from the FHLB | 112,500 | 117,500 | 157,500 | ||||||
| Borrowings, subordinated notes and debentures | 425,818 | 445,244 | 255,896 | ||||||
| Securities loaned | 206,889 | 474,400 | 539,505 | ||||||
| Customer, broker-dealer and clearing payables | 500,584 | 511,654 | 510,040 | ||||||
| Total stockholders’ equity | 1,700,972 | 1,642,973 | 1,458,621 | ||||||
| Capital Ratios: | |||||||||
| Equity to assets at end of period | 9.24 | % | 9.44 | % | 9.78 | % | |||
| Axos Financial, Inc.: | |||||||||
| Tier 1 leverage (to adjusted average assets) | 8.98 | % | 9.25 | % | 9.19 | % | |||
| Common equity tier 1 capital (to risk-weighted assets) | 9.97 | % | 9.86 | % | 10.79 | % | |||
| Tier 1 capital (to risk-weighted assets) | 9.97 | % | 9.86 | % | 10.79 | % | |||
| Total capital (to risk-weighted assets) | 12.90 | % | 12.73 | % | 13.10 | % | |||
| Axos Bank: | |||||||||
| Tier 1 leverage (to adjusted average assets) | 10.30 | % | 10.65 | % | 10.14 | % | |||
| Common equity tier 1 capital (to risk-weighted assets) | 10.87 | % | 11.24 | % | 11.89 | % | |||
| Tier 1 capital (to risk-weighted assets) | 10.87 | % | 11.24 | % | 11.89 | % | |||
| Total capital (to risk-weighted assets) | 11.71 | % | 12.01 | % | 12.80 | % | |||
| Axos Clearing LLC: | |||||||||
| Net capital | $ | 49,183 | $ | 38,915 | $ | 39,663 | |||
| Excess capital | $ | 42,324 | $ | 32,665 | $ | 31,435 | |||
| Net capital as a percentage of aggregate debit items | 14.34 | % | 12.45 | % | 9.64 | % | |||
| Net capital in excess of 5% aggregate debit items | $ | 32,035 | $ | 23,290 | $ | 19,092 |
AXOS FINANCIAL, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Unaudited – dollars in thousands, except per share data)
| At or for the Three Months Ended | ||||||
|---|---|---|---|---|---|---|
| September 30, | ||||||
| 2022 | 2021 | |||||
| Selected Income Statement Data: | ||||||
| Interest and dividend income | $ | 223,786 | $ | 158,310 | ||
| Interest expense | 43,311 | 11,668 | ||||
| Net interest income | 180,475 | 146,642 | ||||
| Provision for credit losses | 8,750 | 4,000 | ||||
| Net interest income after provision for credit losses | 171,725 | 142,642 | ||||
| Non-interest income | 27,208 | 26,702 | ||||
| Non-interest expense | 116,087 | 84,431 | ||||
| Income before income tax expense | 82,846 | 84,913 | ||||
| Income tax expense | 24,439 | 24,703 | ||||
| Net income | $ | 58,407 | $ | 60,210 | ||
| Per Common Share Data: | ||||||
| Net income: | ||||||
| Basic | $ | 0.98 | $ | 1.01 | ||
| Diluted | $ | 0.97 | $ | 0.99 | ||
| Adjusted earnings per common share (Non-GAAP)1 | $ | 1.18 | $ | 1.03 | ||
| Book value per common share | $ | 28.35 | $ | 24.52 | ||
| Tangible book value per common share (Non-GAAP)1 | $ | 25.24 | $ | 21.43 | ||
| Weighted average number of common shares outstanding: | ||||||
| Basic | 59,854,584 | 59,390,846 | ||||
| Diluted | 60,486,394 | 60,644,288 | ||||
| Common shares outstanding at end of period | 59,998,673 | 59,494,633 | ||||
| Common shares issued at end of period | 69,151,152 | 68,370,617 | ||||
| Performance Ratios and Other Data: | ||||||
| Loan originations for investment | $ | 2,486,224 | $ | 2,092,279 | ||
| Loan originations for sale | $ | 70,073 | $ | 209,967 | ||
| Return on average assets | 1.32 | % | 1.66 | % | ||
| Return on average common stockholders’ equity | 13.91 | % | 16.20 | % | ||
| Interest rate spread2 | 3.66 | % | 4.04 | % | ||
| Net interest margin3 | 4.26 | % | 4.22 | % | ||
| Net interest margin3 – Banking Business Segment | 4.50 | % | 4.48 | % | ||
| Efficiency ratio4 | 55.90 | % | 48.71 | % | ||
| Efficiency ratio4 – Banking Business Segment | 52.93 | % | 39.93 | % | ||
| Asset Quality Ratios: | ||||||
| Net annualized charge-offs to average loans5 | 0.05 | % | 0.01 | % | ||
| Non-performing loans and leases to total loans | 0.78 | % | 1.12 | % | ||
| Non-performing assets to total assets | 0.68 | % | 0.94 | % | ||
| Allowance for credit losses - loans to total loans held for investment | 1.01 | % | 1.14 | % | ||
| Allowance for credit losses - loans to non-performing loans | 129.04 | % | 101.97 | % |
1 See “Use of Non-GAAP Financial Measures” herein.
2 Interest rate spread represents the difference between the annualized weighted average yield on interest-earning assets and the annualized weighted average
rate paid on interest-bearing liabilities.
3 Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.
4 Efficiency ratio represents non-interest expense as a percentage of the aggregate of net interest income and non-interest income.
5 Net charge-offs do not include any amounts transferred to loans held for sale.
AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| (Dollars in thousands, except par and stated value) | (Unaudited) September 30, 2022 | June 30,<br>2022 | ||
|---|---|---|---|---|
| ASSETS | ||||
| Cash and cash equivalents | $ | 1,369,170 | $ | 1,202,587 |
| Cash segregated for regulatory purposes | 328,878 | 372,112 | ||
| Total cash, cash equivalents, and cash segregated | 1,698,048 | 1,574,699 | ||
| Securities: | ||||
| Trading | 75 | 1,758 | ||
| Available-for-sale | 257,634 | 262,518 | ||
| Stock of regulatory agencies | 20,881 | 20,368 | ||
| Loans held for sale, carried at fair value | 9,463 | 4,973 | ||
| Loans held for sale, lower of cost or fair value | 10,476 | 10,938 | ||
| Loans—net of allowance for credit losses of $155,472 as of September 30, 2022 and $148,617 as of June 30, 2022 | 15,211,573 | 14,091,061 | ||
| Mortgage servicing rights, carried at fair value | 26,373 | 25,213 | ||
| Securities borrowed | 87,622 | 338,980 | ||
| Customer, broker-dealer and clearing receivables | 410,842 | 417,417 | ||
| Goodwill and other intangible assets—net | 160,429 | 156,405 | ||
| Other assets | 513,662 | 496,835 | ||
| TOTAL ASSETS | $ | 18,407,078 | $ | 17,401,165 |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
| Deposits: | ||||
| Non-interest bearing | 4,626,907 | 5,033,970 | ||
| Interest bearing | 10,549,724 | 8,912,452 | ||
| Total deposits | 15,176,631 | 13,946,422 | ||
| Advances from the Federal Home Loan Bank | 112,500 | 117,500 | ||
| Borrowings, subordinated notes and debentures | 425,818 | 445,244 | ||
| Securities loaned | 206,889 | 474,400 | ||
| Customer, broker-dealer and clearing payables | 500,584 | 511,654 | ||
| Accounts payable and other liabilities | 283,684 | 262,972 | ||
| Total liabilities | 16,706,106 | 15,758,192 | ||
| STOCKHOLDERS’ EQUITY: | ||||
| Common stock—$0.01 par value; 150,000,000 shares authorized; 69,151,152 shares issued and 59,998,673 shares outstanding as of September 30, 2022; 68,859,722 shares issued and 59,777,949 shares outstanding as of June 30, 2022 | 692 | 689 | ||
| Additional paid-in capital | 459,101 | 453,784 | ||
| Accumulated other comprehensive income (loss)—net of tax | (5,770) | (2,933) | ||
| Retained earnings | 1,486,851 | 1,428,444 | ||
| Treasury stock, at cost; 9,152,479 shares as of September 30, 2022 and 9,081,773 shares as of June 30, 2022 | (239,902) | (237,011) | ||
| Total stockholders’ equity | 1,700,972 | 1,642,973 | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 18,407,078 | $ | 17,401,165 |
AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three Months Ended | |||||
|---|---|---|---|---|---|
| September 30, | |||||
| (Dollars in thousands, except earnings per common share) | 2022 | 2021 | |||
| INTEREST AND DIVIDEND INCOME: | |||||
| Loans, including fees | $ | 208,338 | $ | 149,176 | |
| Securities borrowed and customer receivables | 4,384 | 6,851 | |||
| Investments | 11,064 | 2,283 | |||
| Total interest and dividend income | 223,786 | 158,310 | |||
| INTEREST EXPENSE: | |||||
| Deposits | 32,505 | 7,712 | |||
| Advances from the Federal Home Loan Bank | 5,163 | 1,016 | |||
| Securities loaned | 943 | 251 | |||
| Other borrowings | 4,700 | 2,689 | |||
| Total interest expense | 43,311 | 11,668 | |||
| Net interest income | 180,475 | 146,642 | |||
| Provision for credit losses | 8,750 | 4,000 | |||
| Net interest income, after provision for credit losses | 171,725 | 142,642 | |||
| NON-INTEREST INCOME: | |||||
| Broker-dealer fee income | 9,178 | 6,462 | |||
| Advisory fee income | 6,959 | 5,304 | |||
| Banking and service fees | 6,514 | 6,680 | |||
| Mortgage banking income | 3,365 | 5,270 | |||
| Prepayment penalty fee income | 1,192 | 2,986 | |||
| Total non-interest income | 27,208 | 26,702 | |||
| NON-INTEREST EXPENSE: | |||||
| Salaries and related costs | 46,996 | 40,737 | |||
| Data processing | 14,022 | 12,092 | |||
| Depreciation and amortization | 6,094 | 5,728 | |||
| Advertising and promotional | 6,370 | 3,372 | |||
| Professional services | 8,087 | 4,545 | |||
| Occupancy and equipment | 4,054 | 3,181 | |||
| FDIC and regulatory fees | 3,735 | 2,266 | |||
| Broker-dealer clearing charges | 2,829 | 4,005 | |||
| General and administrative expense | 23,900 | 8,505 | |||
| Total non-interest expense | 116,087 | 84,431 | |||
| INCOME BEFORE INCOME TAXES | 82,846 | 84,913 | |||
| INCOME TAXES | 24,439 | 24,703 | |||
| NET INCOME | $ | 58,407 | $ | 60,210 | |
| COMPREHENSIVE INCOME | $ | 55,570 | $ | 59,703 | |
| Basic earnings per common share | $ | 0.98 | $ | 1.01 | |
| Diluted earnings per common share | $ | 0.97 | $ | 0.99 |
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
The following table presents information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin:
| For the Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | ||||||||||||
| 2022 | 2021 | |||||||||||
| (Dollars in thousands) | Average<br><br>Balance1 | Interest<br>Income/<br>Expense | Average Yields<br><br>Earned/Rates<br><br>Paid2 | Average<br><br>Balance1 | Interest<br>Income/<br>Expense | Average Yields<br><br>Earned/Rates<br><br>Paid2 | ||||||
| Assets: | ||||||||||||
| Loans3, 4 | $ | 14,761,077 | $ | 208,338 | 5.65 | % | $ | 11,662,383 | $ | 149,176 | 5.12 | % |
| Interest-earning deposits in other financial institutions | 1,235,712 | 7,347 | 2.38 | % | 1,163,143 | 591 | 0.20 | % | ||||
| Mortgage-backed and other investment securities4 | 257,119 | 3,298 | 5.13 | % | 156,360 | 1,421 | 3.64 | % | ||||
| Securities borrowed and margin lending | 669,150 | 4,384 | 2.62 | % | 903,542 | 6,851 | 3.03 | % | ||||
| Stock of the regulatory agencies | 28,281 | 419 | 5.93 | % | 20,694 | 271 | 5.24 | % | ||||
| Total interest-earning assets | 16,951,339 | 223,786 | 5.28 | % | 13,906,122 | 158,310 | 4.55 | % | ||||
| Non-interest-earning assets | 689,230 | 596,295 | ||||||||||
| Total assets | $ | 17,640,569 | $ | 14,502,417 | ||||||||
| Liabilities and Stockholders’ Equity: | ||||||||||||
| Interest-bearing demand and savings | $ | 7,715,655 | $ | 27,709 | 1.44 | % | $ | 6,564,620 | $ | 3,567 | 0.22 | % |
| Time deposits | 1,156,717 | 4,796 | 1.66 | % | 1,363,061 | 4,145 | 1.22 | % | ||||
| Securities loaned | 534,538 | 943 | 0.71 | % | 660,040 | 251 | 0.15 | % | ||||
| Advances from the FHLB | 880,348 | 5,163 | 2.35 | % | 295,402 | 1,016 | 1.38 | % | ||||
| Borrowings, subordinated notes and debentures | 385,148 | 4,700 | 4.88 | % | 223,837 | 2,689 | 4.81 | % | ||||
| Total interest-bearing liabilities | 10,672,406 | 43,311 | 1.62 | % | 9,106,960 | 11,668 | 0.51 | % | ||||
| Non-interest-bearing demand deposits | 4,517,918 | 3,191,171 | ||||||||||
| Other non-interest-bearing liabilities | 770,189 | 717,725 | ||||||||||
| Stockholders’ equity | 1,680,056 | 1,486,561 | ||||||||||
| Total liabilities and stockholders’ equity | $ | 17,640,569 | $ | 14,502,417 | ||||||||
| Net interest income | $ | 180,475 | $ | 146,642 | ||||||||
| Interest rate spread5 | 3.66 | % | 4.04 | % | ||||||||
| Net interest margin6 | 4.26 | % | 4.22 | % |
1Average balances are obtained from daily data.
2Annualized.
3Loans include loans held for sale, loan premiums and unearned fees.
4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loans include average balances of $25.9 million and $26.7 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2022 and 2021 three-month periods, respectively.
5Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.
6Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
BANKING BUSINESS
The following table presents our Banking Business segment’s information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin for the three months ended September 30, 2022 and 2021:
| For the Three Months Ended | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| September 30, | ||||||||||||
| 2022 | 2021 | |||||||||||
| (Dollars in thousands) | Average<br><br>Balance1 | Interest<br>Income/<br>Expense | Average Yields<br><br>Earned/Rates<br><br>Paid2 | Average<br><br>Balance1 | Interest<br>Income/<br>Expense | Average Yields<br><br>Earned/Rates<br><br>Paid2 | ||||||
| Assets: | ||||||||||||
| Loans3, 4 | $ | 14,735,034 | $ | 208,010 | 5.65 | % | $ | 11,622,074 | $ | 148,843 | 5.12 | % |
| Interest-earning deposits in other financial institutions | 929,206 | 5,631 | 2.42 | % | 879,856 | 337 | 0.15 | % | ||||
| Mortgage-backed and other investment securities4 | 275,975 | 3,371 | 4.89 | % | 180,545 | 1,546 | 3.43 | % | ||||
| Stock of the regulatory agencies | 28,281 | 418 | 5.91 | % | 17,824 | 270 | 6.06 | % | ||||
| Total interest-earning assets | 15,968,496 | 217,430 | 5.45 | % | 12,700,299 | 150,996 | 4.76 | % | ||||
| Non-interest-earning assets | 312,320 | 286,810 | ||||||||||
| Total assets | $ | 16,280,816 | $ | 12,987,109 | ||||||||
| Liabilities and Stockholders’ Equity: | ||||||||||||
| Interest-bearing demand and savings | $ | 7,809,552 | $ | 27,741 | 1.42 | % | $ | 6,614,799 | $ | 3,594 | 0.22 | % |
| Time deposits | 1,156,717 | 4,796 | 1.66 | % | 1,363,061 | 4,145 | 1.22 | % | ||||
| Advances from the FHLB | 880,348 | 5,163 | 2.35 | % | 295,402 | 1,016 | 1.38 | % | ||||
| Borrowings, subordinated notes and debentures | 22 | — | — | % | 43 | — | — | % | ||||
| Total interest-bearing liabilities | 9,846,639 | 37,700 | 1.53 | % | 8,273,305 | 8,755 | 0.42 | % | ||||
| Non-interest-bearing demand deposits | 4,583,593 | 3,238,709 | ||||||||||
| Other non-interest-bearing liabilities | 190,997 | 124,213 | ||||||||||
| Stockholders’ equity | 1,659,587 | 1,350,882 | ||||||||||
| Total liabilities and stockholders’ equity | $ | 16,280,816 | $ | 12,987,109 | ||||||||
| Net interest income | $ | 179,730 | $ | 142,241 | ||||||||
| Interest rate spread5 | 3.92 | % | 4.34 | % | ||||||||
| Net interest margin6 | 4.50 | % | 4.48 | % |
1Average balances are obtained from daily data.
2Annualized.
3Loans include loans held for sale, loan premiums and unearned fees.
4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loans include average balances of $25.9 million and $26.7 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2022 and 2021 three-month periods, respectively.
5Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.
6Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.
septsupplement
Axos Q1 Fiscal 2023 Earnings Supplement October 27, 2022 NYSE: AX
1 Loan Growth by Category for First Quarter Ended September 30, 2022 Loans Single Family Mortgage & Warehouse Multifamily & Commercial Mortgage Commercial Real Estate Auto & Consumer Jumbo Mortgage Multifamily Small Balance Commercial Lender Finance RE SF Warehouse Lending Asset-Based Lending Auto CRE Specialty Unsecured / OD Equipment Leasing Q1 FY23 $ millions Other Q4 FY22 $3,833 177 2,127 838 4,848 676 138 557 74 10 $125 (104) 42 45 453 290 23 64 0 Inc (Dec) Commercial & Industrial Non-RE Lender Finance Non-RE 839 98 1,267 95 $15,384 $14,254 $1,130 (1) $3,708 281 2,085 793 4,395 386 115 493 74 11 741 1,172
In the money +75 Bps +100 Bps +150 Bps Interest Rate Components of Loan and Lease Portfolio* At September 30, 2022 Floor Analysis – Variable-Rate Loans Fixed/Hybrid Years to Maturity / RepricingMix of Loan Repricing Types Variable 53% Hybrid 38% Fixed 9% 8,046 8,046 8,046 93% 100% 100% 100% 382 710 1,635 2,930 5,821 6,959 6,972 7,095 - 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 1/2 1 2 3 5 10 20 >20 Years $M $M 5% 10% 23% 41% 100%98%98%82% 7,467 *Excludes Equipment Financing and SFR Warehouse
Change in Allowance for Credit Losses (ACL) & Unfunded Loan Commitments Reserve (UCL) ($ in millions) 148.6 (2.4) 0.5 8.8 155.5 11.0 11.0 120 130 140 150 160 170 June 30, 2022 ACL + UCL Gross Charge-offs Provisions for credit losses Gross Recoveries Sept 30, 2022 ACL + UCL UCLACL 1.3 3
4 Allowance for Credit Losses (ACL) by Loan Category as of September 30, 2022 Loans Single Family - Mortgage and Warehouse Multifamily & Commercial Mortgage Commercial Real Estate Auto & Consumer Loan Balance $ millions Other ACL $ $4,009.8 2,965.0 5,523.9 631.3 10.0 ACL % Commercial & Industrial Non-RE 2,244.3 $15,384.3 14.6 73.8 14.6 0.1 34.4 $18.0 $155.5 1.01% 1.34% 0.49% 0.45% 0.10% 2.31% 1.53%
Credit Quality ($ millions) Non-performing Loans Remain Low 6/30/2022 Loans O/S NPLs % Single Family-Mortgage & Warehouse $3,988.5 $66.4 1.66% Multifamily and Commercial Mortgage 2,877.7 33.4 1.16 Commercial Real Estate 4,781.0 14.9 0.31 Commercial & Industrial - Non-RE 2,028.1 3.0 0.15 Auto & Consumer 567.2 0.4 0.07 Other 11.1 0.1 0.90 Total $14,253.6 $118.2 0.83% 9/30/2022 Loans O/S NPLs % Single Family-Mortgage & Warehouse $4,009.8 $65.7 1.64% Multifamily and Commercial Mortgage 2,965.0 35.8 1.21 Commercial Real Estate 5,523.9 14.9 0.27 Commercial & Industrial - Non-RE 2,244.3 3.0 0.13 Auto & Consumer 631.3 1.0 0.16 Other 10.0 0.1 1.00 Total $15,384.3 $120.5 0.78% Change at 9/30/22 from 6/30/22 Loans O/S NPLs Single Family-Mortgage & Warehouse $21.3 ($0.7) Multifamily and Commercial Mortgage 87.3 2.4 Commercial Real Estate 742.9 0.0 Commercial & Industrial - Non-RE 216.2 0.0 Auto & Consumer 64.1 0.6 Other (1.1) 0.0 Total $1,130.7 $2.3 5
6 Greg Garrabrants, President and CEO Derrick Walsh, EVP and CFO Andy Micheletti, EVP of Finance investors@axosfinancial.com www.axosfinancial.com Johnny Lai, SVP Corporate Development and Investor Relations Phone: 858.649.2218 Mobile: 858.245.1442 jlai@axosfinancial.com Contact Information
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