Axos Financial Inc
For the period ended Sep 30, 2024. Filed Oct 30, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Oct 30, 2024
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2. Fair Value
- FAIR VALUE
The following tables set forth the Company’s financial assets and liabilities measured at fair value on a recurring basis at September 30, 2024 and June 30, 2024. Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement:
| September 30, 2024 | |||
|---|---|---|---|
| (Dollars in thousands) | Significant OtherObservableInputs(Level 2) | SignificantUnobservableInputs(Level 3) | Total |
| ASSETS: | |||
| Trading securities | $594 | $— | $594 |
| Available-for-sale securities: | |||
| Agency MBS | 43,120 | — | 43,120 |
| Non-Agency MBS | — | 91,309 | 91,309 |
| Municipal | 3,567 | — | 3,567 |
| Total—Available-for-sale securities: | $46,687 | $91,309 | $137,996 |
| Loans held for sale | $14,566 | $— | $14,566 |
| Servicing rights | $— | $27,335 | $27,335 |
| Other assets—Derivative instruments | $66,172 | $— | $66,172 |
| LIABILITIES: | |||
| Accounts payable and other liabilities—Derivative instruments | $63,225 | $— | $63,225 |
| June 30, 2024 | |||
| (Dollars in thousands) | Significant OtherObservableInputs(Level 2) | SignificantUnobservableInputs(Level 3) | Total |
| ASSETS: | |||
| Trading securities | $353 | $— | $353 |
| Available-for-sale securities: | |||
| Agency MBS | 27,259 | — | 27,259 |
| Non-Agency MBS | — | 110,928 | 110,928 |
| Municipal | 3,424 | — | 3,424 |
| Total—Available-for-sale securities: | $30,683 | $110,928 | $141,611 |
| Loans held for sale | $16,482 | $— | $16,482 |
| Servicing rights | $— | $28,924 | $28,924 |
| Other assets—Derivative instruments | $106,796 | $— | $106,796 |
| LIABILITIES: | |||
| Accounts payable and other liabilities—Derivative instruments | $102,949 | $— | $102,949 |
The following tables present additional information about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:
| For the Three Months Ended | |||
|---|---|---|---|
| September 30, 2024 | |||
| (Dollars in thousands) | Available-for-sale Securities:Non-Agency MBS | Servicing Rights1 | Total |
| Opening Balance | $110,928 | $28,924 | $139,852 |
| Total gains or losses for the period: | |||
| Included in earnings—Mortgage banking and servicing rights income | — | (1,852) | (1,852) |
| Included in other comprehensive income | 782 | — | 782 |
| Purchases, retentions, issues, sales and settlements: | |||
| Purchases/Retentions | — | 263 | 263 |
| Settlements | (20,401) | — | (20,401) |
| Closing balance | $91,309 | $27,335 | $118,644 |
| Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | $— | $(1,852) | $(1,852) |
1 Earnings from servicing rights were attributable to: time and payoffs, representing a decrease in servicing rights value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $0.2 million for the three months ended September 30, 2024 and a decrease in servicing rights value resulting from market-driven changes in interest rates of $1.6 million for the three months ended September 30, 2024. Additions to servicing rights were related to purchases and servicing rights retained upon sale of loans held for sale.
| For the Three Months Ended | |||
|---|---|---|---|
| September 30, 2023 | |||
| (Dollars in thousands) | Available-for-sale Securities:Non-Agency MBS | Servicing Rights1 | Total |
| Opening Balance | $205,005 | $25,443 | $230,448 |
| Total gains or losses for the period: | |||
| Included in earnings—Mortgage banking and servicing rights income | — | 1,858 | 1,858 |
| Included in other comprehensive income | 1,316 | — | 1,316 |
| Purchases, retentions, issues, sales and settlements: | |||
| Purchases/Retentions | — | 2,037 | 2,037 |
| Settlements | (245) | — | (245) |
| Closing balance | $206,076 | $29,338 | $235,414 |
| Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | $— | $1,858 | $1,858 |
1 Earnings from servicing rights were attributable to: time and payoffs, representing a decrease in servicing rights value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $0.2 million for the three months ended September 30, 2023, and an increase in servicing rights value resulting from market-driven changes in interest rates of $2.1 million for the three months ended September 30, 2023. Additions to servicing rights were related to purchases and servicing rights retained upon sale of loans held for sale.
The table below summarizes the quantitative information about Level 3 fair value measurements:
| September 30, 2024 | ||||
|---|---|---|---|---|
| (Dollars in thousands) | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average)1 |
| Available-for-sale securities: Non-Agency MBS | $91,309 | Discounted Cash Flow | Projected Constant Prepayment Rate,Projected Constant Default Rate,Projected Loss Severity,Discount Rate over SOFR Swaps,Credit Enhancement | 0.0 to 69.6% (34.5%)0.0 to 5.5% (2.6%)0.0 to 68.9% (32.6%)2.5 to 4.9% (2.6%)0.0 to 64.3% (26.1%) |
| Servicing Rights | $27,335 | Discounted Cash Flow | Projected Constant Prepayment Rate,Life (in years),Discount Rate | 5.2 to 24.2% (10.9%)2.4 to 11.1 (8.3) 9.5 to 11.2% (9.8%) |
| June 30, 2024 | ||||
|---|---|---|---|---|
| (Dollars in thousands) | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average)1 |
| Available-for-sale securities: Non-Agency MBS | $110,928 | Discounted Cash Flow | Projected Constant Prepayment Rate,Projected Constant Default Rate,Projected Loss Severity,Discount Rate over SOFR Swaps,Credit Enhancement | 0.0 to 72.1% (38.0%)0.0 to 13.7% (2.8%)0.0 to 68.9% (32.9%)2.5 to 4.9% (2.5%)0.0 to 64.9% (22.8%) |
| Servicing Rights | $28,924 | Discounted Cash Flow | Projected Constant Prepayment Rate,Life (in years),Discount Rate | 5.5 to 95.2% (11.8%)0.4 to 14.9 (7.9) 9.5 to 11.2% (9.8%) |
1 The weighted average for Available-for-sale securities: Non-agency MBS is based on the relative fair value of the securities and for Servicing Rights is based on the relative unpaid principal of the loans being serviced.
For non-agency mortgage-backed securities, significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the projected loss severity and a directionally opposite change in the assumption used for projected prepayment rates. For servicing rights, significant increases in projected prepayment rates or discount rates in isolation would result in a significantly lower fair value measurement, while a significant increase in expected life in isolation would result in a significantly higher fair value measurement. Generally, a change in the projected prepayment rates is accompanied by a directionally opposite change in expected life.
The aggregate fair value of loans held for sale, carried at fair value, the contractual balance (including accrued interest), and the unrealized gain were:
| (Dollars in thousands) | September 30, 2024 | June 30, 2024 |
|---|---|---|
| Aggregate fair value | $14,566 | $16,482 |
| Contractual balance | 13,977 | 15,966 |
| Unrealized gain | $589 | $516 |
The total interest income and amount of gains and losses from changes in fair value included in earnings for loans held for sale were:
| September 30, | ||
|---|---|---|
| (Dollars in thousands) | 2024 | 2023 |
| Interest income | $288 | $189 |
| Change in fair value | 17 | (129) |
| Total | $305 | $60 |
Fair Value of Financial Instruments
Carrying amounts and estimated fair values of financial instruments at September 30, 2024 and June 30, 2024 were:
| September 30, 2024 | |||||
|---|---|---|---|---|---|
| Fair Value | |||||
| (Dollars in thousands) | CarryingAmount | Level 1 | Level 2 | Level 3 | Total Fair Value |
| Financial assets: | |||||
| Cash, cash equivalents and restricted cash | $2,803,856 | $2,803,856 | $— | $— | $2,803,856 |
| Trading securities | 594 | — | 594 | — | 594 |
| Available-for-sale securities | 137,996 | — | 46,687 | 91,309 | 137,996 |
| Stock of regulatory agencies | 34,417 | — | 34,417 | — | 34,417 |
| Loans held for sale, at fair value | 14,566 | — | 14,566 | — | 14,566 |
| Loans held for investment—net | 19,280,609 | — | — | 19,563,846 | 19,563,846 |
| Securities borrowed | 84,326 | — | — | 83,501 | 83,501 |
| Customer, broker-dealer and clearing receivables | 262,774 | — | — | 261,163 | 261,163 |
| Servicing rights | 27,335 | — | — | 27,335 | 27,335 |
| Other assets - derivative instruments | 66,172 | — | 66,172 | — | 66,172 |
| Financial liabilities: | |||||
| Total deposits | 19,973,329 | — | 19,743,134 | — | 19,743,134 |
| Advances from the Federal Home Loan Bank | 90,000 | — | 86,700 | — | 86,700 |
| Borrowings, subordinated notes and debentures | 313,519 | — | 285,114 | — | 285,114 |
| Securities loaned | 95,883 | — | — | 95,398 | 95,398 |
| Customer, broker-dealer and clearing payables | 315,985 | — | — | 315,985 | 315,985 |
| Accounts payable and other liabilities - derivative instruments | 63,225 | — | 63,225 | — | 63,225 |
| June 30, 2024 | |||||
|---|---|---|---|---|---|
| Fair Value | |||||
| (Dollars in thousands) | CarryingAmount | Level 1 | Level 2 | Level 3 | Total Fair Value |
| Financial assets: | |||||
| Cash, cash equivalents and restricted cash | $2,185,776 | $2,185,776 | $— | $— | $2,185,776 |
| Trading securities | 353 | — | 353 | — | 353 |
| Available-for-sale securities | 141,611 | — | 30,683 | 110,928 | 141,611 |
| Stock of regulatory agencies | 21,957 | — | 21,957 | — | 21,957 |
| Loans held for sale, at fair value | 16,482 | — | 16,482 | — | 16,482 |
| Loans held for investment—net | 19,231,385 | — | — | 19,209,442 | 19,209,442 |
| Securities borrowed | 67,212 | — | — | 71,480 | 71,480 |
| Customer, broker-dealer and clearing receivables | 240,028 | — | — | 249,317 | 249,317 |
| Servicing rights | 28,924 | — | — | 28,924 | 28,924 |
| Other assets - derivative instruments | 106,796 | — | 106,796 | — | 106,796 |
| Financial liabilities: | |||||
| Total deposits | 19,359,217 | — | 19,217,281 | — | 19,217,281 |
| Advances from the Federal Home Loan Bank | 90,000 | — | 84,201 | — | 84,201 |
| Borrowings, subordinated notes and debentures | 325,679 | — | 302,487 | — | 302,487 |
| Securities loaned | 74,177 | — | — | 74,021 | 74,021 |
| Customer, broker-dealer and clearing payables | 301,127 | — | — | 301,127 | 301,127 |
| Accounts payable and other liabilities - derivative instruments | 102,949 | — | 102,949 | — | 102,949 |
The carrying amount represents the estimated fair value for cash, cash equivalents and restricted cash, stock of regulatory agencies, interest bearing deposits, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans, deposits, borrowings or subordinated debt and for variable rate loans, deposits, borrowings or subordinated debt with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. A discussion of the methods of valuing trading securities, available-for-sale securities, loans held for sale and derivatives can be found in Note 3—“Fair Value”in the 2024 Form 10-K. The fair value of off-balance sheet items is not considered material.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.