Axos Financial, Inc. Reports Fiscal Third Quarter 2021 Results
Axos Financial, Inc. (NYSE: AX) reported its third fiscal quarter results for the period ending March 31, 2021. Net income fell 4.3% to $53.6 million, with diluted earnings per share at $0.89, down from $0.91 year-over-year. Adjusted earnings also decreased by 3.9% to $55.4 million. Net interest income decreased by 8.7%, primarily due to a decline in tax product-related earnings. However, total assets rose 21.9% to $14.8 billion. The company announced plans to deploy excess capital in acquiring E*TRADE Advisor Services, enhancing its technological capabilities and fee income sources.
- Record net income of $161.5 million for nine months ended March 31, 2021, up 16.9% year-over-year.
- Growth in ending loan balances, excluding mortgage warehouse, increased by 12.3% annualized.
- Improvement in fee income by 43.7% year-over-year, excluding last year's H&R Block-related fees.
- Successful redemption of $51 million subordinated notes, saving $3.2 million annually.
- 4.3% decrease in net income compared to the same quarter last year.
- 8.7% decline in net interest income year-over-year, significantly affected by the loss of tax product income.
- Non-interest income dropped by 24.3%, primarily due to reduced banking and service fees.
Axos Financial, Inc. (NYSE: AX) (“Axos”), parent company of Axos Bank (the “Bank”), today announced financial results for the third fiscal quarter ended March 31, 2021. Net income was
Adjusted earnings and adjusted earnings per diluted common share (“adjusted EPS”), non-GAAP measures, which excludes non-cash amortization expenses and non-recurring costs related to mergers and acquisitions, and other non-recurring costs decreased
Third Quarter Fiscal 2021 Financial Summary:
|
Three Months Ended March 31 |
|
|
||||||
(Dollars in thousands, except per share data) |
Q3 Fiscal 2021 |
|
Q3 Fiscal 2020 |
|
% Change |
||||
Net interest income |
$ |
135,669 |
|
|
$ |
148,616 |
|
|
(8.7)% |
Non-interest income |
$ |
23,887 |
|
|
$ |
31,542 |
|
|
(24.3)% |
Net income |
$ |
53,645 |
|
|
$ |
56,057 |
|
|
(4.3)% |
Adjusted earnings (Non-GAAP)1 |
$ |
55,416 |
|
|
$ |
57,652 |
|
|
(3.9)% |
Net income attributable to common stockholders |
$ |
53,645 |
|
|
$ |
55,980 |
|
|
(4.2)% |
Diluted EPS |
$ |
0.89 |
|
|
$ |
0.91 |
|
|
(2.2)% |
Adjusted EPS (Non-GAAP)1 |
$ |
0.92 |
|
|
$ |
0.94 |
|
|
(2.1)% |
1 See “Use of Non-GAAP Financial Measures” |
|||||||||
For the nine months ended March 31, 2021, net income was a record
“Our fiscal third quarter 2021 results are a continuation of consistent progress in each of our businesses,” stated Greg Garrabrants, President and CEO of Axos. “Net interest margins showed further improvement, increasing by 2 basis points over linked quarter and 12 basis points for the banking business segment. Ending loan balances excluding mortgage warehouse were up
Other Highlights
-
Total assets grew to
$14.8 billion , up$2.7 billion or21.9% compared to March 31, 2020 -
Net interest income decreased
8.7% year-over-year to$135.7 million ; excluding net interest income from Refund Advance Loans in the quarter ended March 31, 2020, net interest income increased17.3% -
Net interest margin increased 2 basis points to
3.96% for the three months ended March 31, 2021 compared to3.94% for the three months ended December 31, 2020; net interest margin for the banking business segment increased 12 basis points to4.23% for the three months ended March 31, 2021 compared to4.11% for the three months ended December 31, 2020 -
Efficiency ratio for the banking business segment was
42.33% for the three months ended March 31, 2021 compared to40.45% for the three months ended December 31, 2020 - Net annualized charge-offs to average loans and leases of 3 basis points compared to 3 basis points for the March 31, 2020 period
- No loans were in forbearance or deferral at March 31, 2021
-
Return on average common stockholders’ equity was
16.12% for the three months ended March 31, 2021 -
Tier 1 leverage capital to adjusted average assets for Axos Bank was
9.56% compared to8.72% for the three months ended March 31, 2020 -
Book value increased
$2.95 t o$22.72 per share, up14.9% from March 31, 2020 -
Completed redemption of all
$51.0 million issued and outstanding6.25% fixed rate subordinated notes on March 31, 2021, which results in a cost savings of$3.2 million annually
Third Quarter Fiscal 2021 Income Statement Summary
During the quarter ended March 31, 2021, Axos earned
The provision for credit losses was
For the third quarter ended March 31, 2021, non-interest income was
Non-interest expense increased
Balance Sheet Summary
Axos’ total assets increased
The Bank’s Tier 1 leverage capital to adjusted average assets ratio was
Conference Call
A conference call and webcast will be held on Thursday, April 29, 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 may be accessed at Axos’ website, http://www.axosfinancial.com. For those unable to listen to the live broadcast, a replay will be available until May 29, 2021, at Axos’ website and telephonically by dialing toll-free number 877-660-6853, passcode 13718242.
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
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 March 31, 2021 |
||||||||||||||
(Dollars in thousands) |
Banking Business |
|
Securities Business |
|
Corporate/Eliminations |
|
Axos Consolidated |
||||||||
Net interest income |
$ |
135,092 |
|
|
$ |
3,847 |
|
|
$ |
(3,270 |
) |
|
$ |
135,669 |
|
Provision for credit losses |
2,700 |
|
|
— |
|
|
— |
|
|
2,700 |
|
||||
Non-interest income |
16,201 |
|
|
8,369 |
|
|
(683 |
) |
|
23,887 |
|
||||
Non-interest expense |
64,040 |
|
|
13,282 |
|
|
3,485 |
|
|
80,807 |
|
||||
Income before taxes |
$ |
84,553 |
|
|
$ |
(1,066 |
) |
|
$ |
(7,438 |
) |
|
$ |
76,049 |
|
|
Three Months Ended March 31, 2020 |
||||||||||||||
(Dollars in thousands) |
Banking Business |
|
Securities Business |
|
Corporate/Eliminations |
|
Axos Consolidated |
||||||||
Net interest income |
$ |
145,372 |
|
|
$ |
3,954 |
|
|
$ |
(710 |
) |
|
$ |
148,616 |
|
Provision for credit losses |
28,500 |
|
|
— |
|
|
— |
|
|
28,500 |
|
||||
Non-interest income |
25,259 |
|
|
6,402 |
|
|
(119 |
) |
|
31,542 |
|
||||
Non-interest expense |
56,661 |
|
|
11,137 |
|
|
3,992 |
|
|
71,790 |
|
||||
Income before taxes |
$ |
85,470 |
|
|
$ |
(781 |
) |
|
$ |
(4,821 |
) |
|
$ |
79,868 |
|
|
Nine Months Ended March 31, 2021 |
||||||||||||||
(Dollars in thousands) |
Banking Business |
|
Securities Business |
|
Corporate/Eliminations |
|
Axos Consolidated |
||||||||
Net interest income |
$ |
390,267 |
|
|
$ |
13,002 |
|
|
$ |
(6,181 |
) |
|
$ |
397,088 |
|
Provision for credit losses |
22,500 |
|
|
— |
|
|
— |
|
|
22,500 |
|
||||
Non-interest income |
68,708 |
|
|
20,725 |
|
|
(973 |
) |
|
88,460 |
|
||||
Non-interest expense |
187,733 |
|
|
35,946 |
|
|
8,971 |
|
|
232,650 |
|
||||
Income before taxes |
$ |
248,742 |
|
|
$ |
(2,219 |
) |
|
$ |
(16,125 |
) |
|
$ |
230,398 |
|
|
Nine Months Ended March 31, 2020 |
||||||||||||||
(Dollars in thousands) |
Banking Business |
|
Securities Business |
|
Corporate/Eliminations |
|
Axos Consolidated |
||||||||
Net interest income |
$ |
350,184 |
|
|
$ |
13,137 |
|
|
$ |
(2,982 |
) |
|
$ |
360,339 |
|
Provision for credit losses |
35,700 |
|
|
— |
|
|
— |
|
|
35,700 |
|
||||
Non-interest income |
57,274 |
|
|
19,087 |
|
|
(2,076 |
) |
|
74,285 |
|
||||
Non-interest expense |
160,547 |
|
|
32,656 |
|
|
11,019 |
|
|
204,222 |
|
||||
Income before taxes |
$ |
211,211 |
|
|
$ |
(432 |
) |
|
$ |
(16,077 |
) |
|
$ |
194,702 |
|
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), as adjusted earnings, a non-GAAP financial measure. 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 (unusual or non-recurring) 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 |
|
Nine Months Ended |
||||||||||||
|
March 31, |
|
March 31, |
||||||||||||
(Dollars in thousands, except per share amounts) |
2021 |
|
2020 |
|
2021 |
|
2020 |
||||||||
Net income |
$ |
53,645 |
|
|
$ |
56,057 |
|
|
$ |
161,452 |
|
|
$ |
138,138 |
|
Acquisition-related costs |
2,511 |
|
|
2,273 |
|
|
7,665 |
|
|
6,520 |
|
||||
Income taxes |
(740 |
) |
|
(678 |
) |
|
(2,285 |
) |
|
(1,895 |
) |
||||
Adjusted earnings (Non-GAAP) |
$ |
55,416 |
|
|
$ |
57,652 |
|
|
$ |
166,832 |
|
|
$ |
142,763 |
|
Adjusted EPS (Non-GAAP) |
$ |
0.92 |
|
|
$ |
0.94 |
|
|
$ |
2.76 |
|
|
$ |
2.31 |
|
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 to tangible book value per common share (Non-GAAP) as of the dates indicated:
|
March 31, |
||||||
(Dollars in thousands, except per share amounts) |
2021 |
|
2020 |
||||
Total stockholders’ equity |
$ |
1,345,650 |
|
|
$ |
1,184,452 |
|
Less: preferred stock |
— |
|
|
5,063 |
|
||
Common stockholders’ equity |
1,345,650 |
|
|
1,179,389 |
|
||
Less: mortgage servicing rights, carried at fair value |
16,631 |
|
|
9,962 |
|
||
Less: goodwill and other intangible assets |
118,133 |
|
|
127,962 |
|
||
Tangible common stockholders’ equity (Non-GAAP) |
$ |
1,210,886 |
|
|
$ |
1,041,465 |
|
Common shares outstanding at end of period |
59,237,765 |
|
|
59,653,192 |
|
||
Tangible book value per common share (Non-GAAP) |
$ |
20.44 |
|
|
$ |
17.46 |
|
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, satisfaction of the conditions to closing of the acquisition of E*TRADE Advisor Services and following closing, Axos’ ability to integrate E*TRADE Advisor Services and realize the benefits of the transaction, 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) |
|||||||||||
|
March 31, 2021 |
|
June 30, 2020 |
|
March 31, 2020 |
||||||
Selected Balance Sheet Data: |
|
|
|
|
|
||||||
Total assets |
$ |
14,827,874 |
|
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| |||||||
