Axos Financial, Inc. (NYSE: AX) (“Axos”), parent company of Axos Bank (the “Bank”), today announced unaudited financial results for the first quarter ended September 30, 2021. Net income was $60.2 million, an increase of 13.6% from $53.0 million for the quarter ended September 30, 2020. Earnings attributable to Axos’ common stockholders was $60.2 million or $0.99 per diluted share for the first quarter of fiscal 2022, an increase of 13.7% from $52.9 million and 12.5% from $0.88 per diluted share for the first quarter of fiscal 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 13.5% to $62.2 million and 13.2% to $1.03, respectively, for the quarter ended September 30, 2021 compared to $54.8 million and $0.91, respectively, for the quarter ended September 30, 2020.

First Quarter Fiscal 2022 Financial Summary

 

 

Three Months Ended
September 30,

 

 

(Dollars in thousands, except per share data)

2021

 

2020

 

% Change

Net interest income

$

146,642

 

 

$

127,327

 

 

15.2

%

Non-interest income

$

26,702

 

 

$

35,855

 

 

(25.5

)%

Net income

$

60,210

 

 

$

53,022

 

 

13.6

%

Adjusted earnings (Non-GAAP)1

$

62,228

 

 

$

54,841

 

 

13.5

%

Net income attributable to common stockholders

$

60,210

 

 

$

52,945

 

 

13.7

%

Diluted EPS

$

0.99

 

 

$

0.88

 

 

12.5

%

Adjusted EPS (Non-GAAP)1

$

1.03

 

 

$

0.91

 

 

13.2

%

1

See “Use of Non-GAAP Financial Measures”

“We generated strong loan growth while increasing our net interest margins,” stated Greg Garrabrants, President and Chief Executive Officer of Axos. “Net loans increased by $464.2 million, or 16.3% annualized, as a result of robust originations in auto, single family mortgage, and C&I lending. Our net interest margin increased 30 basis points linked quarter and 38 basis points year-over-year to 4.22%. We continue to maintain strong asset yields and reduce our funding costs. With over $3.6 billion of non-interest bearing deposits and the addition of the Axos Advisor Services (“AAS”) RIA custody business, we are well positioned to grow net interest income, fee income and net interest margin, irrespective of the interest rate environment.”

“We continue to generate strong profitability and returns, as reflected by our 1.66% return on assets, 16.2% return on equity and 39.9% efficiency ratio for the banking business segment this quarter,” stated Derrick Walsh, Executive Vice President and Chief Financial Officer of Axos. “Excluding one-time expenses related to the E*TRADE Advisor Services (“EAS”) acquisition, which was rebranded as AAS post-close, Axos Clearing posted a pretax profit of $1.5 million in the three months ended September 30, 2021. Our credit quality remains strong, with only 1 basis point of net annualized charge-offs and 94 basis points of non-performing assets comprised of primarily low LTV loans secured by real estate.”

Other Highlights

  • Net loans totaled $11.9 billion at September 30, 2021, an increase of $464.2 million from $11.4 billion at June 30, 2021
  • Completed the acquisition of EAS on August 2, 2021
  • Net interest margin was 4.22% compared to 3.84% in the three months ended September 30, 2020; average cost on all checking and savings deposits of 0.15% compared to 0.41% in the three months ended September 30, 2020
  • Return on average common stockholders’ equity was 16.20% for the three months ended September 30, 2021 compared to 17.26% for the comparable period one year ago
  • Net annualized charge-offs to average loans was 1 basis point, down from 7 basis points for the three months ended September 30, 2020
  • Book value increased to $24.52 per share, up from $20.80, or 17.9% at September 30, 2020

First Quarter Fiscal 2022 Income Statement Summary

For the three months ended September 30, 2021, Axos net income attributable to common stockholders was $60.2 million or $0.99 per diluted common share compared to $52.9 million, or $0.88 per diluted share for the three months ended September 30, 2020. Net interest income increased $19.3 million or 15.2% for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, due to an increase in average earning assets and a reduction in the rates paid on interest-bearing demand and savings deposits due to decreases in market deposit rates across the industry.

The provision for credit losses was $4.0 million for the three months ended September 30, 2021 compared to $11.8 million for the three months ended September 30, 2020 primarily due to a $6.5 million additional reserve on Refund Advance loans in the three months ended September 30, 2020, which did not recur due to the Bank’s termination of income tax products.

For the three months ended September 30, 2021, non-interest income was $26.7 million compared to $35.9 million for the three months ended September 30, 2020. The $9.2 million decrease was primarily the result of a $14.3 million decrease in mortgage banking income and a $2.2 million decrease in banking and service fees, partially offset by an increase of $6.1 million in broker-dealer fee income driven by the acquisition of EAS and an increase of $1.6 million in prepayment penalty fee income. The decrease in mortgage banking revenue was due to the year-over-year decline in mortgage refinance volume.

Non-interest expense, comprised of various operating expenses, increased $8.9 million to $84.4 million for the three months ended September 30, 2021 from $75.5 million for the three months ended September 30, 2020. The change was primarily driven by increases of $4.2 million in data processing, $2.2 million in other general and administrative and $2.1 million in salary and payroll costs as a result of AAS headcounts acquired during the three months ended September 30, 2021.

Balance Sheet Summary

Axos’ total assets increased $0.6 billion, or 4.5%, to $14.9 billion, at September 30, 2021, from $14.3 billion at June 30, 2021, primarily due to an increase of $0.5 billion in loans held for investment and $0.2 billion in cash, partially offset by a decrease of $0.2 billion in securities borrowed. Total liabilities increased by $0.5 billion, or 4.5%, to $13.4 billion at September 30, 2021, from $12.9 billion at June 30, 2021, primarily due to an increase in deposits of $0.9 billion, partially offset by a decrease of $0.2 billion in securities loaned. Stockholders’ equity increased by $0.1 billion, or 4.1%, to $1.5 billion at September 30, 2021 from $1.4 billion at June 30, 2021. The increase was primarily the result of net income of $60.2 million.

The Bank’s Tier 1 core capital to adjusted average assets ratio was 10.14% at September 30, 2021. At September 30, 2020, the Tier 1 core capital to adjusted average assets ratio was 8.83%.

Conference Call

A conference call and webcast will be held on Thursday, October 28, 2021 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, http://investors.axosfinancial.com. For those unable to listen to the live broadcast, a replay will be available until November 28, 2021, at Axos’ website and telephonically by dialing toll-free number 877-660-6853, passcode 13723822.

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 (the “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 $14.9 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 $41 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.

The following tables present the operating results of the segments:

 

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

 

 

Three Months Ended September 30, 2020

(Dollars in thousands)

Banking
Business

 

Securities
Business

 

Corporate/Eliminations

 

Axos
Consolidated

Net interest income

$

123,008

 

 

$

4,894

 

 

$

(575)

 

 

$

127,327

 

Provision for credit losses

11,800

 

 

—

 

 

—

 

 

11,800

 

Non-interest income

30,212

 

 

5,784

 

 

(141)

 

 

35,855

 

Non-interest expense

61,217

 

 

11,352

 

 

2,977

 

 

75,546

 

Income before taxes

$

80,203

 

 

$

(674)

 

 

$

(3,693)

 

 

$

75,836

 

Use of Non-GAAP Financial Measures

In addition to the results presented in accordance with GAAP, this report 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 report 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 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 the Bank’s operating performance. We believe excluding the non-recurring acquisition related costs and other costs (unusual or non-recurring) 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 September 30,

(Dollars in thousands, except per share amounts)

2021

 

2020

Net income

$

60,210

 

 

$

53,022

 

Acquisition-related costs

2,846

 

 

2,602

 

Income taxes

(828)

 

 

(783)

 

Adjusted earnings (Non-GAAP)

$

62,228

 

 

$

54,841

 

Adjusted EPS (Non-GAAP)

$

1.03

 

 

$

0.91

 

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)

2021

 

2020

Total stockholders’ equity

$

1,458,621

 

 

$

1,236,965

 

Less: preferred stock

—

 

 

5,063

 

Common stockholders’ equity

1,458,621

 

 

1,231,902

 

Less: mortgage servicing rights, carried at fair value

18,438

 

 

12,130

 

Less: goodwill and other intangible assets

164,944

 

 

122,817

 

Tangible common stockholders’ equity (Non-GAAP)

$

1,275,239

 

 

$

1,096,955

 

Common shares outstanding at end of period

59,494,633

 

 

59,215,934

 

Tangible book value per common share (Non-GAAP)

$

21.43

 

 

$

18.52

 

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 and the anticipated timing and financial performance of other offerings, initiatives, and acquisitions. 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 pending class action litigation filed against the Company 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.

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,
2021

 

June 30,
2021

 

September 30,
2020

Selected Balance Sheet Data:

 

 

 

 

 

Total assets

$

14,906,750

 

 

$

14,265,565

 

 

$

13,382,238

 

Loans—net of allowance for credit losses

11,879,021

 

 

11,414,814

 

 

10,925,450

 

Loans held for sale, carried at fair value

33,344

 

 

29,768

 

 

89,454

 

Loans held for sale, lower of cost or fair value

11,949

 

 

12,294

 

 

14,729

 

Allowance for credit losses - loans

136,778

 

 

132,958

 

 

132,915

 

Securities—trading

1,941

 

 

1,983

 

 

423

 

Securities—available-for-sale

135,996

 

 

187,335

 

 

203,931

 

Securities borrowed

457,282

 

 

619,088

 

 

263,470

 

Customer, broker-dealer and clearing receivables

427,169

 

 

369,815

 

 

283,125

 

Total deposits

11,747,442

 

 

10,815,797

 

 

10,555,658

 

Advances from the FHLB

157,500

 

 

353,500

 

 

242,500

 

Borrowings, subordinated notes and debentures

255,896

 

 

221,358

 

 

453,843

 

Securities loaned

539,505

 

 

728,988

 

 

315,976

 

Customer, broker-dealer and clearing payables

510,040

 

 

535,425

 

 

369,428

 

Total stockholders’ equity

1,458,621

 

 

1,400,936

 

 

1,236,965

 

 

 

 

 

 

 

Capital Ratios:

 

 

 

 

 

Equity to assets at end of period

9.78

%

 

9.82

%

 

9.24

%

Axos Financial, Inc.:

 

 

 

 

 

Tier 1 leverage (core) capital to adjusted average assets

9.19

%

 

8.82

%

 

8.52

%

Common equity tier 1 capital (to risk-weighted assets)

10.79

%

 

11.36

%

 

11.08

%

Tier 1 capital (to risk-weighted assets)

10.79

%

 

11.36

%

 

11.13

%

Total capital (to risk-weighted assets)

13.10

%

 

13.78

%

 

14.39

%

Axos Bank:

 

 

 

 

 

Tier 1 leverage (core) capital to adjusted average assets

10.14

%

 

9.45

%

 

8.83

%

Common equity tier 1 capital (to risk-weighted assets)

11.89

%

 

12.28

%

 

11.52

%

Tier 1 capital (to risk-weighted assets)

11.89

%

 

12.28

%

 

11.52

%

Total capital (to risk-weighted assets)

12.80

%

 

13.21

%

 

12.55

%

Axos Clearing, LLC:

 

 

 

 

 

Net capital

$

39,663

 

 

$

35,950

 

 

$

34,322

 

Excess capital

$

31,435

 

 

$

27,904

 

 

$

28,830

 

Net capital as a percentage of aggregate debit items

9.64

%

 

8.94

%

 

12.50

%

Net capital in excess of 5% aggregate debit items

$

19,092

 

 

$

15,836

 

 

$

20,590

 

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,

 

2021

 

2020

Selected Income Statement Data:

 

 

 

Interest and dividend income

$

158,310

 

 

$

149,889

 

Interest expense

11,668

 

 

22,562

 

Net interest income

146,642

 

 

127,327

 

Provision for credit losses

4,000

 

 

11,800

 

Net interest income after provision for credit losses

142,642

 

 

115,527

 

Non-interest income

26,702

 

 

35,855

 

Non-interest expense

84,431

 

 

75,546

 

Income before income tax expense

84,913

 

 

75,836

 

Income tax expense

24,703

 

 

22,814

 

Net income

$

60,210

 

 

$

53,022

 

Net income attributable to common stock

$

60,210

 

 

$

52,945

 

 

 

 

 

Per Common Share Data:

 

 

 

Net income:

 

 

 

Basic

$

1.01

 

 

$

0.89

 

Diluted

$

0.99

 

 

$

0.88

 

Adjusted earnings (Non-GAAP)

$

1.03

 

 

$

0.91

 

Book value

$

24.52

 

 

$

20.80

 

Tangible book value (Non-GAAP)

$

21.43

 

 

$

18.52

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

Basic

59,390,846

 

 

59,509,320

 

Diluted

60,644,288

 

 

59,926,784

 

Common shares outstanding at end of period

59,494,633

 

 

59,215,934

 

Common shares issued at end of period

68,370,617

 

 

67,622,935

 

 

 

 

 

Performance Ratios and Other Data:

 

 

 

Loan originations for investment

$

2,092,279

 

 

$

1,330,812

 

Loan originations for sale

$

209,967

 

 

$

440,804

 

Return on average assets

1.66

%

 

1.56

%

Return on average common stockholders’ equity

16.20

%

 

17.26

%

Interest rate spread1

4.04

%

 

3.62

%

Net interest margin2

4.22

%

 

3.84

%

Net interest margin2 – Banking Business Segment only

4.48

%

 

3.91

%

Efficiency ratio3

48.71

%

 

46.30

%

Efficiency ratio3 – Banking Business Segment only

39.93

%

 

39.95

%

 

 

 

 

Asset Quality Ratios:

 

 

 

Net annualized charge-offs to average loans

0.01

%

 

0.07

%

Non-performing loans to total loans

1.12

%

 

1.56

%

Non-performing assets to total assets

0.94

%

 

1.33

%

Allowance for credit losses to total loans held for investment at end of period

1.14

%

 

1.20

%

Allowance for credit losses to non-performing loans

101.97

%

 

77.23

%

1

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.

2

Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

3

Efficiency ratio represents non-interest expense as a percentage of the aggregate of net interest income and non-interest income.