Axos Financial, Inc. (NYSE: AX) (“Axos”), parent company of Axos Bank (the “Bank”), today announced unaudited financial results for the fourth fiscal quarter and full fiscal year ended June 30, 2023. Net income for the quarter was $87.4 million, an increase of 50.9% over net income of $57.9 million for the quarter ended June 30, 2022. Earnings per diluted share for the quarter were $1.46, an increase of $0.50, or 52.1%, as compared to earnings per diluted share of $0.96 for the quarter ended June 30, 2022.
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 32.3% to $89.4 million and 33.9% to $1.50, respectively, for the quarter ended June 30, 2023 compared to $67.6 million and $1.12, respectively, for the quarter ended June 30, 2022.
Fourth Quarter Fiscal 2023 Financial Summary:
Three Months Ended June 30, | ||||||||
(Dollars in thousands, except per share data) | 2023 | 2022 | % Change | |||||
Net interest income | $ | 203,754 | $ | 165,410 | 23.2 | % | ||
Non-interest income | $ | 32,705 | $ | 27,100 | 20.7 | % | ||
Net income | $ | 87,356 | $ | 57,896 | 50.9 | % | ||
Adjusted Earnings (Non-GAAP)1 | $ | 89,431 | $ | 67,616 | 32.3 | % | ||
Diluted EPS | $ | 1.46 | $ | 0.96 | 52.1 | % | ||
Adjusted EPS (Non-GAAP)1 | $ | 1.50 | $ | 1.12 | 33.9 | % | ||
1 See “Use of Non-GAAP Financial Measures”
For the fiscal year ended June 30, 2023, net income was a record $307.2 million, an increase of 27.6% over net income of $240.7 million for the year ended June 30, 2022. Earnings per diluted share was $5.07, an increase of $1.10, or 27.7%, as compared to earnings per diluted share of $3.97 for the year ended June 30, 2022.
“We achieved record earnings and maintained strong credit quality and liquidity in the three and twelve months ended June 30, 2023,” stated Greg Garrabrants, President and Chief Executive Officer of Axos. “Double-digit growth in net interest income and a net interest margin above the high end of our long-term target were the primary contributors to our strong results. Our credit quality remains resilient, supported by our diverse, asset-based lending at low loan-to-values. Our strong balance sheet, with a modest unrealized loss on our securities portfolio equal to less than 0.5% of our shareholders’ equity and a growing deposit base generated by a variety of consumer and commercial banking and securities businesses, positions us well for continued growth.”
“Earnings per diluted share increased 52% year-over-year to $1.46 in the fourth quarter of fiscal 2023, which included $0.08 per diluted share attributed to $5.2 million of non-recurring tax benefits,” stated Derrick Walsh, Executive Vice President and Chief Financial Officer. “Even without these non-recurring benefits, our earnings per diluted share results would represent year-over-year growth of 44%. Our reported net interest margin of 4.19% and 4.35% for the three and twelve months ended June 30, 2023 was negatively impacted by approximately $1.2 billion of excess liquidity. Excluding the excess liquidity, our net interest margin would have been 4.39% and 4.42% for the fourth quarter and full year 2023, respectively.”
Other Highlights:
- Net loans for investment totaled $16.5 billion at June 30, 2023, an increase of $0.6 billion, or 15.7% annualized, from March 31, 2023
- Deposits increased $0.4 billion, or 9.2% annualized, between March 31, 2023 and June 30, 2023
- Approximately 90% of total deposits were FDIC-insured or collateralized at June 30, 2023
- Pretax income for the Securities Business was $15.5 million and $59.6 million for the three and twelve months ended June 30, 2023
- Percentage of non-performing loans relative to total loans was 0.52% at June 30, 2023, down from 0.60% at March 31, 2023
- Unrealized losses of $9.3 million on the available-for-sale securities portfolio was less than 0.5% of stockholders’ equity at June 30, 2023; no securities were classified as held-to-maturity
- Tier 1 capital to risk weighted assets was 11.63% for the Bank and 10.94% for Axos at June 30, 2023, up from 11.55% and 10.71%, respectively, at March 31, 2023
- Book value increased to $32.53 per share, up 18.4% compared to June 30, 2022
- Repurchased $17.7 million of common stock during the quarter ended June 30, 2023
Fourth Quarter Fiscal 2023 Income Statement Summary
Net income was $87.4 million and earnings per diluted share was $1.46 for the three months ended June 30, 2023 compared to net income of $57.9 million and earnings per diluted share of $0.96 for the three months ended June 30, 2022. Net interest income increased to $203.8 million, up 23.2% for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due to higher rates earned and higher average balances in the loan portfolio, partially offset by higher rates paid on deposits and increased deposit balances.
The provision for credit losses was $7.0 million for the three months ended June 30, 2023 compared to $6.0 million for the three months ended June 30, 2022, primarily due to loan growth, changes in the macroeconomic environment and changes in loan product mix.
Non-interest income increased to $32.7 million, up 20.7%, for the three months ended June 30, 2023 from $27.1 million for the three months ended June 30, 2022. The net increase was primarily due to a $8.9 million increase in broker-dealer fee income and a $1.5 million increase in banking and service fees, partially offset by a $2.6 million decrease in prepayment penalty fee income and a $1.5 million decrease in mortgage banking income.
Non-interest expense, comprised of various operating expenses, increased 7.3% to $112.5 million for the three months ended June 30, 2023 from $104.8 million for the three months ended June 30, 2022. The net increase was primarily driven by an increase in salaries and related costs of $11.0 million and higher advertising and promotional expenses of $4.6 million, partially offset by lower general and administrative expenses, reflecting the absence of an $11 million charge due largely to a one-time resolution of a contractual claim in the prior year quarter.
Our effective tax rate was 25.34% for the three months ended June 30, 2023 compared to 29.15% for the three months ended June 30, 2022. The lower tax rate for the three months ended June 30, 2023, was primarily due to the impact of one-time income tax credits recognized in the current quarter.
Full Year Fiscal 2023 Highlights
- Net income reached a record $307.2 million, an increase of 27.6% compared to the fiscal year ended June 30, 2022
- Earnings per diluted share outstanding were $5.07, up 27.7% from $3.97 in the fiscal year ended June 30, 2022
- Deposits increased by $3.2 billion, or 28%, to $17.1 billion during the fiscal year ended June 30, 2023
- Net interest margin for the Banking Business segment increased to 4.48% for the fiscal year ended June 30, 2023 compared to 4.36% for the fiscal year ended June 30, 2022
- Efficiency ratio was 49.48% for the fiscal year ended June 30, 2023 compared to 50.25% for the fiscal year ended June 30, 2022
- Return on average assets increased to 1.64% for the fiscal year ended June 30, 2023 from 1.57% for the fiscal year ended June 30, 2022
Balance Sheet Summary
Axos’ total assets increased $2.9 billion or 16.9% to $20.3 billion at June 30, 2023 from June 30, 2022, primarily due to an increase of $2.4 billion in loans held for investment and an increase of $0.8 billion in total cash held. Total liabilities increased $2.7 billion to $18.4 billion at June 30, 2023 from June 30, 2022, primarily due to an increase of $3.2 billion in deposits, partially offset by a $0.3 billion decrease in securities loaned. Stockholders’ equity increased by $274.2 million, or 16.7%, to $1.9 billion at June 30, 2023 from $1.6 billion at June 30, 2022. The increase was primarily the result of net income of $307.2 million and $20.0 million of stock-based compensation activity, partially offset by the repurchase of $49.3 million of common stock.
The Bank’s Tier 1 capital ratio was 11.63% at June 30, 2023 compared to 11.24% at June 30, 2022.
Conference Call
A conference call and webcast will be held on Thursday, July 27, 2023 at 4:00 PM Eastern / 1:00 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 access at Axos’ website, http://www.axosfinancial.com. For those unable to listen to the live broadcast, a replay will be available until August 27, 2023, at the Axos Financial website and telephonically by dialing toll-free number 877-660-6853, passcode 13739708.
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, the Bank and Axos Nevada Holding comprise substantially all of the Company’s assets and liabilities and revenues and expenses. 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 $20.3 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 $34.8 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:
For the Three Months Ended June 30, 2023 | ||||||||||||
(Dollars in thousands) | Banking Business | Securities Business | Corporate/Eliminations | Axos Consolidated | ||||||||
Net interest income | $ | 201,770 | $ | 5,556 | $ | (3,572 | ) | $ | 203,754 | |||
Provision for loan losses | 7,000 | — | — | 7,000 | ||||||||
Non-interest income | 10,306 | 37,640 | (15,241 | ) | 32,705 | |||||||
Non-interest expense | 95,579 | 27,648 | (10,771 | ) | 112,456 | |||||||
Income (Loss) before income taxes | $ | 109,497 | $ | 15,548 | $ | (8,042 | ) | $ | 117,003 | |||
For the Three Months Ended June 30, 2022 | |||||||||||||
(Dollars in thousands) | Banking Business | Securities Business | Corporate/Eliminations | Axos Consolidated | |||||||||
Net interest income | $ | 165,504 | $ | 3,509 | $ | (3,603 | ) | $ | 165,410 | ||||
Provision for loan losses | 6,000 | — | — | 6,000 | |||||||||
Non-interest income | 14,004 | 18,864 | (5,768 | ) | 27,100 | ||||||||
Non-interest expense | 83,817 | 22,797 | (1,821 | ) | 104,793 | ||||||||
Income (Loss) before income taxes | $ | 89,691 | $ | (424 | ) | $ | (7,550 | ) | $ | 81,717 | |||
Twelve Months Ended June 30, 2023 | ||||||||||||
(Dollars in thousands) | Banking Business | Securities Business | Corporate/Eliminations | Axos Consolidated | ||||||||
Net interest income | $ | 776,294 | $ | 21,042 | $ | (14,215 | ) | $ | 783,121 | |||
Provision for loan losses | 24,750 | — | — | 24,750 | ||||||||
Non-interest income | 42,260 | 141,107 | (62,879 | ) | 120,488 | |||||||
Non-interest expense | 390,911 | 102,572 | (46,368 | ) | 447,115 | |||||||
Income (Loss) before income taxes | $ | 402,893 | $ | 59,577 | $ | (30,726 | ) | $ | 431,744 | |||
Twelve Months Ended June 30, 2022 | |||||||||||||
(Dollars in thousands) | Banking Business | Securities Business | Corporate/Eliminations | Axos Consolidated | |||||||||
Net interest income | $ | 597,833 | $ | 17,580 | $ | (8,255 | ) | $ | 607,158 | ||||
Provision for loan losses | 18,500 | — | — | 18,500 | |||||||||
Non-interest income | 60,881 | 64,069 | (11,587 | ) | 113,363 | ||||||||
Non-interest expense | 274,079 | 84,014 | 3,969 | 362,062 | |||||||||
Income (Loss) before income taxes | $ | 366,135 | $ | (2,365 | ) | $ | (23,811 | ) | $ | 339,959 | |||
Use of Non-GAAP Financial Measures
In addition to the results presented in accordance with GAAP, this release includes the non-GAAP financial measures 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. As noted below with respect to each measure, we believe the non-GAAP financial measures disclosed in this release enhance investors’ understanding of our business and performance, and our management uses these non-GAAP measures when it internally evaluates the performance of our business and makes operating decisions. However, 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 comparable GAAP measure, to adjusted earnings and adjusted EPS (Non-GAAP) for the periods shown:
Three Months Ended | Twelve Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
(Dollars in thousands, except per share amounts) | 2023 | 2022 | 2023 | 2022 | |||||||||||
Net income | $ | 87,356 | $ | 57,896 | $ | 307,165 | $ | 240,716 | |||||||
Acquisition-related costs | 2,779 | 2,745 | 10,948 | 11,355 | |||||||||||
Other costs1 | — | 10,975 | 16,000 | 10,975 | |||||||||||
Income taxes | (704 | ) | (4,000 | ) | (7,776 | ) | (6,519 | ) | |||||||
Adjusted earnings (Non-GAAP) | $ | 89,431 | $ | 67,616 | $ | 326,337 | $ | 256,527 | |||||||
Average dilutive common shares outstanding | 59,707,871 | 60,508,304 | |||||||||||||
