Axos Financial, Inc. Reports Record Second Quarter Fiscal 2024 Results
Axos Financial, Inc. (NYSE: AX) reported a significant increase in net income and diluted earnings per share for the second fiscal quarter ended December 31, 2023. The company's net interest income, non-interest income, and total deposits also experienced substantial growth. Axos' credit quality remained resilient, and the company's total capital to risk-weighted assets increased. Additionally, the company repurchased a significant amount of common stock during the quarter.
Positive
Net income increased by 86.1% to $151.8 million compared to the same quarter in the previous year
Diluted earnings per share increased by 94.1% to $2.62 compared to the same quarter in the previous year
Net interest income increased by 14.4% to $228.6 million compared to the same quarter in the previous year
Non-interest income increased by 338.2% to $124.1 million compared to the same quarter in the previous year
Total deposits increased by 12.6% to $18.2 billion compared to the previous quarter
Total capital to risk-weighted assets increased to 13.79% at December 31, 2023
Book value increased by 22.6% to $36.53 per share compared to December 31, 2022
Repurchased $58.7 million of common stock during the quarter
The reported net income increase of 86.1% for Axos Financial, Inc. is a substantial growth figure, particularly in the context of the banking industry where margins are often squeezed by competition and regulatory costs. The diluted earnings per share (EPS) increase of 94.1% is also significant, as it indicates not only profitability but also efficiency in earnings relative to share count. The non-GAAP adjusted earnings and adjusted EPS reveal a more modest growth, which suggests that the extraordinary gain from the FDIC Loan Purchase played a considerable role in the reported figures.
Investors should note the net interest income growth of 14.4%, which is a healthy sign of expanding business operations. However, the non-interest income's surge by 338.2% is primarily due to the one-time gain from the FDIC Loan Purchase, which is not a recurring source of income. The provision for credit losses has increased, which could indicate a conservative approach to potential future loan defaults, a prudent move in uncertain economic times.
The share repurchase program, which reduced outstanding shares, can be seen as a positive signal of management's confidence in the company's value, potentially leading to higher EPS in future quarters. However, investors should consider the sustainability of the growth rate and the impact of non-recurring gains on the company's financial health.
The loan and deposit growth reported by Axos Financial, Inc. are key indicators of the company's market position and competitiveness. The 22.0% annualized growth in net loans for investment and the 12.6% annualized increase in total deposits suggest strong customer acquisition and retention. This could be attributed to Axos' digital banking model, which may offer a competitive advantage over traditional brick-and-mortar banks.
The acquisition of loan pools from the FDIC at 63% of par value, resulting in a $65 million after-tax gain, demonstrates Axos' strategic opportunism. It also reflects the company's ability to manage and integrate sizable loan portfolios, which could be a critical factor for future growth. The increase in the allowance for credit losses post-FDIC Loan Purchase indicates a cautious stance towards newly acquired assets.
With 90% of total deposits being FDIC-insured or collateralized, the company mitigates risk and reassures stakeholders about the safety of their deposits. The net annualized charge-offs to average loans decreasing to 0.02% is an excellent indicator of credit quality and effective risk management. These factors, combined with a strong capital to risk-weighted assets ratio, suggest robust financial health and resilience.
The Federal Reserve's interest rate policies have a direct impact on banks like Axos Financial, Inc., particularly on their net interest margins (NIM). The reported NIM of 4.55%, up from 4.49%, indicates that Axos has effectively navigated the interest rate environment, likely through strategic asset-liability management. The increase in book value per share by 22.6% is a positive indicator of the company's intrinsic value growth over time.
However, the broader economic context, including potential regulatory changes, inflation and interest rate hikes, could affect future profitability. The bank's performance must be evaluated against macroeconomic indicators such as GDP growth, unemployment rates and consumer confidence, as these will influence loan demand and default rates.
The stock repurchase program, while immediately accretive to EPS, should be analyzed in the context of the company's long-term capital allocation strategy. It is essential to assess whether these funds could have been deployed towards further growth opportunities or retained as a buffer against potential economic downturns.
01/30/2024 - 04:05 PM
LAS VEGAS --(BUSINESS WIRE)--
Axos Financial, Inc. (NYSE: AX) (“Axos” or the “Company”) today announced unaudited financial results for the second fiscal quarter ended December 31, 2023. Net income was $151.8 million 86.1% from $81.6 million $2.62 $1.27 94.1% , as compared to diluted earnings per share of $1.35
Adjusted earnings and adjusted earnings per diluted common share (“Adjusted EPS”), non-GAAP measures, which exclude non-cash amortization expenses, non-recurring items related to mergers and acquisitions, including certain gains and provisions resulting from the Company’s FDIC Loan Purchase (as described below), and other non-recurring costs increased $9.1 million $92.5 million $0.22 $1.60 $83.4 million $1.38
Second Quarter Fiscal 2024 Financial Summary
Three Months Ended
December 31,
(Dollars in thousands, except per share data)
2023
2022
% Change
Net interest income
$
228,606
$
199,910
14.4
%
Non-interest income
$
124,129
$
28,329
338.2
%
Net income
$
151,771
$
81,552
86.1
%
Adjusted earnings (Non-GAAP)1
$
92,452
$
83,354
10.9
%
Diluted EPS
$
2.62
$
1.35
94.1
%
Adjusted EPS (Non-GAAP)1
$
1.60
$
1.38
15.9
%
1 See “Use of Non-GAAP Financial Measures”
For the six months ended December 31, 2023, net income was $234.4 million 67.5% from net income of $140.0 million $3.98 $1.67 72.3% , as compared to diluted earnings per share of $2.31
“Our record second quarter earnings were driven by strong organic loan and deposit growth, further net interest margin expansion, disciplined expense management and a gain associated with an opportunistic loan purchase from the FDIC,” stated Greg Garrabrants, President and Chief Executive Officer of Axos. “Excluding the one-time gain and the provision for credit losses associated with the FDIC Loan Purchase, diluted EPS was up 15.7% year-over-year. Our strong returns, margins and excess capital provide us with flexibility to allocate capital to opportunities where we see the best risk-adjusted returns.”
“Our credit quality remains resilient, with annualized net charge-offs to average loans declining by 3 basis points year-over-year to 0.02% in the quarter ended December 31, 2023,” stated Derrick Walsh, Executive Vice President and Chief Financial Officer of Axos. “Our provision for credit losses was $13.5 million $75 million 1.33% of total loans held for investment.”
Other Highlights
Net interest margin was 4.55% for the quarter ended December 31, 2023 compared to 4.49% for the quarter ended December 31, 2022
Net loans for investment totaled $18.3 billion $1.8 billion 22.0% annualized, from $16.5 billion
Total deposits were $18.2 billion $1.1 billion 12.6% annualized, from $17.1 billion
Completed the purchase from the Federal Deposit Insurance Corporation (“FDIC”) of two performing commercial real estate and multi-family loan pools with a combined unpaid principal balance of approximately $1.25 billion 63% of par value (the “FDIC Loan Purchase”), and recognized a $65 million $75 million
Approximately 90% of total deposits were FDIC-insured or collateralized at December 31, 2023
After-tax net unrealized losses of $3.3 million 0.5% of stockholders’ equity at December 31, 2023
Net annualized charge-offs to average loans was 0.02% for the quarter ended December 31, 2023, down from 0.04% for the prior quarter and 0.05% for the quarter ended December 31, 2022
Total capital to risk-weighted assets was 13.79% for Axos Financial, Inc. at December 31, 2023, up from 13.82% at June 30, 2023
Book value increased to $36.53 $29.79 22.6%
Repurchased $58.7 million $36.49
Second Quarter Fiscal 2024 Income Statement Summary
Net income was $151.8 million $2.62 $81.6 million $1.35 $28.7 million 14.4% for the three months ended December 31, 2023 compared to the three months ended December 31, 2022, primarily due to an increase in interest income from loans attributable to higher rates earned and higher average balances, partially offset by higher rates paid and higher average interest-bearing deposit balances.
The provision for credit losses was $13.5 million $3.0 million
Non-interest income increased to $124.1 million $28.3 million $92.4 million
Non-interest expense, comprised of various operating expenses, increased $13.8 million $121.8 million $108.0 million
Balance Sheet Summary
Axos’ total assets increased by $1.3 billion 6.3% , to $21.6 billion $20.3 billion $1.8 billion $0.6 billion $1.1 billion 6.0% , to $19.5 billion $18.4 billion $1.1 billion $0.2 billion 8.4% , to $2.1 billion $1.9 billion $234.4 million $83.2 million
Conference Call
A conference call and webcast will be held on Tuesday, January 30, 2024 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 February 29, 2024, at Axos’ website and telephonically by dialing toll-free number 877-660-6853, passcode 13743449.
About Axos Financial, Inc. and Subsidiaries
Axos Financial, Inc., with approximately $21.6 billion $34.4 billion http://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:
For the Three Months Ended December 31, 2023
(Dollars in thousands)
Banking
Business
Securities
Corporate/
Axos
Net interest income
$
226,635
$
6,080
$
(4,109
)
$
228,606
Provision for credit losses
13,500
—
—
13,500
Non-interest income
103,779
32,641
(12,291
)
124,129
Non-interest expense
102,282
27,968
(8,411
)
121,839
Income before income taxes
$
214,632
$
10,753
$
(7,989
)
$
217,396
For the Three Months Ended December 31, 2022
(Dollars in thousands)
Banking
Business
Securities
Corporate/
Axos
Net interest income
$
198,545
$
4,876
$
(3,511
)
$
199,910
Provision for credit losses
3,001
—
—
3,001
Non-interest income
10,557
36,004
(18,232
)
28,329
Non-interest expense
96,783
25,271
(14,027
)
108,027
Income before income taxes
$
109,318
$
15,609
$
(7,716
)
$
117,211
For the Six Months Ended December 31, 2023
(Dollars in thousands)
Banking
Business
Securities
Corporate/
Axos
Net interest income
$
435,854
$
11,622
$
(7,715
)
$
439,761
Provision for credit losses
20,500
—
—
20,500
Non-interest income
116,336
67,196
(24,896
)
158,636
Non-interest expense
203,068
55,491
(16,214
)
242,345
Income before income taxes
$
328,622
$
23,327
$
(16,397
)
$
335,552
For the Six Months Ended December 31, 2022
(Dollars in thousands)
Banking
Business
Securities
Corporate/
Axos
Net interest income
$
378,275
$
9,151
$
(7,041
)
$
380,385
Provision for credit losses
11,751
—
—
11,751
Non-interest income
21,269
65,169
(30,901
)
55,537
Non-interest expense
197,579
49,786
(23,251
)
224,114
Income before income taxes
$
190,214
$
24,534
$
(14,691
)
$
200,057
Use of Non-GAAP Financial Measures
In addition to the results presented in accordance with accounting principles generally accepted in the United States of America (“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 items (including amortization of intangible assets related to acquisitions) and other costs (unusual or non-recurring charges). 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
Six Months Ended
December 31,
December 31,
(Dollars in thousands, except per share amounts)
2023
2022
2023
2022
Net income
$
151,771
$
81,552
$
234,416
$
139,959
FDIC Loan Purchase - Gain on purchase
(92,397
)
—
(92,397
)
—
FDIC Loan Purchase - Provision for credit losses
4,648
—
4,648
—
Acquisition-related costs
2,780
2,590
5,570
5,324
Other costs1
—
—
—
16,000
Income tax effect
25,650
(788
)
24,811
(6,406
)
Adjusted earnings (Non-GAAP)
$
92,452
$
83,354
$
177,048
$
154,877
Average dilutive common shares outstanding
57,932,834
60,514,635
58,930,427
60,540,353
Diluted EPS
$
2.62
$
1.35
$
3.98
$
2.31
FDIC Loan Purchase - Gain on purchase
(1.59
)
—
(1.57
)
—
FDIC Loan Purchase - Provision for credit losses
0.08
—
0.08
—
Acquisition-related costs
0.05
0.04
0.09
0.09
Other costs1
—
—
—
0.26
Income tax effect
0.44
(0.01
)
0.42
(0.10
)
Adjusted EPS (Non-GAAP)
$
1.60
$
1.38
$
3.00
$
2.56
1 Other costs for the six months ended December 31, 2022 reflect an accrual recorded in the first quarter of fiscal year 2023 as a result of an adverse legal judgement that has not been finalized.
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 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:
December 31,
(Dollars in thousands, except per share amounts)
2023
2022
Common stockholders’ equity
$
2,078,224
$
1,787,559
Less: servicing rights, carried at fair value
28,043
25,526
Less: goodwill and intangible assets—net
146,793
157,585
Tangible common stockholders’ equity (Non-GAAP)
$
1,903,388
$
1,604,448
Common shares outstanding at end of period
56,898,377
60,000,079
Book value per common share
36.53
29.79
Less: servicing rights, carried at fair value per common share
0.49
0.43
Less: goodwill and other intangible assets—net per common share
2.59
2.62
Tangible book value per common share (Non-GAAP)
$
33.45
$
26.74
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’ deposit balances and capital ratios, 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, expectations of the environment in which Axos operates and projections of future performance. 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 Axos’ ability to successfully integrate acquisitions and realize the anticipated benefits of the transactions, changes in the interest rate environment, monetary policy, inflation, government regulation, general economic conditions, changes in the competitive marketplace, conditions in the real estate markets in which we operate, risks associated with credit quality, our ability to attract and retain deposits and access other sources of liquidity, and 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, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2023, could cause actual results to differ materially from those expressed or implied in any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Axos undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All written and oral forward-looking statements made in connection with this press release, which are attributable to us or persons acting on Axos’ behalf are expressly qualified in their entirety by the foregoing information.
AXOS FINANCIAL, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Unaudited – dollars in thousands)
December 31,
2023
June 30,
2023
December 31,
2022
Selected Balance Sheet Data:
Total assets
$
21,623,764
$
20,348,469
$
18,741,035
Loans—net of allowance for credit losses
18,264,354
16,456,728
15,473,212
Loans held for sale, carried at fair value
13,468
23,203
4,292
Loans held for sale, lower of cost or fair value
—
776
455
Allowance for credit losses
251,749
166,680
157,218
Trading securities
329
758
372
Available-for-sale securities
239,812
232,350
248,062
Securities borrowed
145,176
134,339
58,846
Customer, broker-dealer and clearing receivables
265,857
374,074
272,579
Total deposits
18,203,912
17,123,108
15,690,494
Advances from the Federal Home Loan Bank
90,000
90,000
100,000
Borrowings, subordinated notes and debentures
341,086
361,779
334,077
Securities loaned
155,492
159,832
156,008
Customer, broker-dealer and clearing payables
368,885
445,477
420,947
Total stockholders’ equity
2,078,224
1,917,159
1,787,559
Capital Ratios:
Equity to assets at end of period
9.61
%
9.42
%
9.54
%
Axos Financial, Inc.:
Tier 1 leverage (to adjusted average assets)
9.39
%
8.96
%
9.06
%
Common equity tier 1 capital (to risk-weighted assets)
10.97
%
10.94
%
10.55
%
Tier 1 capital (to risk-weighted assets)
10.97
%
10.94
%
10.55
%
Total capital (to risk-weighted assets)
13.79
%
13.82
%
13.49
%
Axos Bank:
Tier 1 leverage (to adjusted average assets)
10.22
%
9.68
%
10.05
%
Common equity tier 1 capital (to risk-weighted assets)
12.26
%
11.63
%
11.28
%
Tier 1 capital (to risk-weighted assets)
12.26
%
11.63
%
11.28
%
Total capital (to risk-weighted assets)
13.25
%
12.50
%
12.13
%
Axos Clearing LLC:
Net capital
$
103,454
$
35,221
$
60,334
Excess capital
$
98,397
$
29,905
$
55,977
Net capital as a percentage of aggregate debit items
40.92
%
13.25
%
27.69
%
Net capital in excess of 5% aggregate debit items
$
90,812
$
21,930
$
49,441
AXOS FINANCIAL, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Unaudited – dollars in thousands, except per share data)
As of or for the
Three Months Ended
As of or for the
Six Months Ended
December 31,
December 31,
(Dollars in thousands, except per share data)
2023
2022
2023
2022
Selected Income Statement Data:
Interest and dividend income
$
394,663
$
279,588
$
758,615
$
503,374
Interest expense
166,057
79,678
318,854
122,989
Net interest income
228,606
199,910
439,761
380,385
Provision for credit losses
13,500
3,001
20,500
11,751
Net interest income, after provision for credit losses
215,106
196,909
419,261
368,634
Non-interest income
124,129
28,329
158,636
55,537
Non-interest expense
121,839
108,027
242,345
224,114
Income before income taxes
217,396
117,211
335,552
200,057
Income tax expense
65,625
35,659
101,136
60,098
Net income
$
151,771
$
81,552
$
234,416
$
139,959
Per Common Share Data:
Net income:
Basic
$
2.65
$
1.36
$
4.04
$
2.34
Diluted
$
2.62
$
1.35
$
3.98
$
2.31
Adjusted earnings per common share (Non-GAAP)1
$
1.60
$
1.38
$
3.00
$
2.56
Book value per common share
$
36.53
$
29.79
$
36.53
$
29.79
Tangible book value per common share (Non-GAAP)1
$
33.45
$
26.74
$
33.45
$
26.74
Weighted average number of common shares outstanding:
Basic
57,216,621
59,999,573
58,082,830
59,927,078
Diluted
57,932,834
60,514,635
58,930,427
60,540,353
Common shares outstanding at end of period
56,898,377
60,000,079
56,898,377
60,000,079
Common shares issued at end of period
69,828,709
69,153,591
69,828,709
69,153,591
Performance Ratios and Other Data:
Loan originations for investment
$
2,739,261
$
2,013,576
$
5,344,593
$
4,499,800
Loan originations for sale
44,325
43,227
96,910
113,300
Loan purchases
789,516
76
841,408
127
Return on average assets
2.90
%
1.77
%
2.29
%
1.55
%
Return on average common stockholders’ equity
30.39
%
18.71
%
23.72
%
16.35
%
Interest rate spread2
3.58
%
3.64
%
3.48
%
3.63
%
Net interest margin3
4.55
%
4.49
%
4.46
%
4.38
%
Net interest margin3 – Banking Business Segment
4.62
%
4.65
%
4.54
%
4.58
%
Efficiency ratio4
34.54
%
47.33
%
40.50
%
51.41
%
Efficiency ratio4 – Banking Business Segment
30.96
%
46.29
%
36.78
%
49.45
%
Asset Quality Ratios:
Net annualized charge-offs to average loans
0.02
%
0.05
%
0.04
%
0.05
%
Non-performing loans and leases to total loans
0.65
%
0.61
%
0.65
%
0.61
%
Non-performing assets to total assets
0.60
%
0.54
%
0.60
%
0.54
%
Allowance for credit losses - loans to total loans held for investment
1.33
%
1.00
%
1.33
%
1.00
%
Allowance for credit losses - loans to non-performing loans
205.50
%
165.51
%
205.50
%
165.51
%
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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240130562627/en/
Investor Relations Contact:
jlai@axosfinancial.com
Source: Axos Financial, Inc.
What is the ticker symbol for Axos Financial, Inc.?
The ticker symbol for Axos Financial, Inc. is AX.
How much did net income increase by for Axos Financial, Inc.?
Net income for Axos Financial, Inc. increased by 86.1% to $151.8 million compared to the same quarter in the previous year.
What was the percentage increase in diluted earnings per share for Axos Financial, Inc.?
Diluted earnings per share for Axos Financial, Inc. increased by 94.1% to $2.62 compared to the same quarter in the previous year.
What was the increase in net interest income for Axos Financial, Inc.?
Net interest income for Axos Financial, Inc. increased by 14.4% to $228.6 million compared to the same quarter in the previous year.
How much did total deposits increase by for Axos Financial, Inc.?
Total deposits for Axos Financial, Inc. increased by 12.6% to $18.2 billion compared to the previous quarter.
What was the total capital to risk-weighted assets ratio for Axos Financial, Inc. at December 31, 2023?
The total capital to risk-weighted assets ratio for Axos Financial, Inc. was 13.79% at December 31, 2023.
How much common stock did Axos Financial, Inc. repurchase during the quarter?
Axos Financial, Inc. repurchased $58.7 million of common stock during the quarter.
