Axos Financial Inc

Balance Sheet Analysis

Our total assets increased $0.7 billion, or 3.1%, to $23.6 billion at September 30, 2024, from $22.9 billion at June 30, 2024, primarily attributable to higher cash and cash equivalents. Our total liabilities increased $0.6 billion, or 2.9%, to $21.2 billion at September 30, 2024 from $20.6 billion at June 30, 2024, primarily attributable to higher deposit balances.

Loans and Allowance for Credit Losses - Loans

The following table sets forth the composition of the loan portfolio:

1 Includes PCD loans of $282.6 million and $284.0 million in Multifamily and Commercial Mortgage and $44.5 million and $44.5 million in Commercial Real Estate as of September 30, 2024 and June 30, 2024, respectively. For further detail on PCD loans, see Note 1—“Summary of Significant Accounting Policies” in the 2024 Form 10-K.

The increase in Multifamily and Commercial Mortgage loans and the related impact on the allowance for credit losses and unaccreted discounts and loan fees, was primarily driven by the FDIC Loan Purchase. For further information on the FDIC Loan Purchase, see Note 2—“Acquisitions”in the 2024 Form 10-K.

Management establishes an allowance for credit losses based upon its evaluation of the expected lifetime credit losses related to the amortized cost basis of loans on the balance sheet. The net charge-off rate for the three months ended September 30, 2024 was 0.17%, compared to 0.04% for the September 30, 2023. The increase in the net charge-off rate from the three months ended September 30, 2023, to the three months ended September 30, 2024, was primarily driven by charge-offs on one commercial mortgage loan and two commercial & industrial – non-RE loans. The amount charged off for each loan had been specifically reserved in full in the allowance for credit losses in prior periods. The commercial mortgage loan was issued in fiscal year 2020 and has been classified as substandard since September 2021. The two commercial & industrial – non-RE loans were issued in fiscal year 2021 and 2022, had been classified as substandard since April 2023 and February 2024, respectively. For additional information regarding the Company’s allowance for credit losses, see Note 4—“Loans & Allowance for Credit Losses”in the accompanying interim condensed consolidated financial statements. For a discussion of the provision for credit losses for the three months ended September 30, 2024, see Item 2—“Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.”We believe that the lower average LTV in the loan portfolio will continue to result in future lower average mortgage loan charge-offs when compared to many other comparable banks.

Asset Quality

Non-performing Assets. Loans reaching 90 days past due are generally placed on nonaccrual status. Loans not yet reaching 90 days past due may be placed on nonaccrual status based on management’s assessment of the aging of contractual principal amounts due, among other factors. For an aging analysis of the Company’s loans held for investment as of September 30, 2024 and June 30, 2024, see Note 4—“Loans & Allowance for Credit Losses” in the accompanying interim condensed consolidated financial statements. Non-performing assets include nonaccrual loans plus other real estate owned and repossessed vehicles.

Non-performing assets consisted of the following:

Our non-performing assets increased to $177.4 million at September 30, 2024 from $115.8 million at June 30, 2024. The increase in non-performing assets during the three months ended September 30, 2024 was primarily the result of an increase in nonaccrual loans of $63.3 million partially offset by a decrease in other real estate owned and repossessed vehicles of $1.7 million. Non-performing assets as a percentage of total assets increased to 0.75% at September 30, 2024 from 0.51% at June 30, 2024.

Available-for-Sale Securities

Total available-for-sale securities were $138.0 million as of September 30, 2024, compared with $141.6 million at June 30, 2024. During the three months ended September 30, 2024, we purchased $16.0 million of securities and received principal repayments of $21.6 million. The remainder of the change for the available-for-sale portfolio is attributable to changes in the fair value of the securities.

Deposits

Deposits increased by $0.6 billion, or 3.2%, to $20.0 billion at September 30, 2024, from $19.4 billion at June 30, 2024. As of September 30, 2024 compared with June 30, 2024, interest-bearing demand and savings increased $671.5 million and non-interest-bearing deposits increased by $80.0 million, while time deposits decreased $137.3 million.

The following table sets forth the composition of the deposit portfolio:

1 Based on weighted-average stated interest rates at end of period.

2 Total deposits includes brokered deposits of $1,440.7 million and $1,611.6 million as of September 30, 2024 and June 30, 2024, respectively, which include brokered time deposits of $275.0 million and $400.0 million as of September 30, 2024 and June 30, 2024, respectively.

The following table sets forth the number of deposit accounts by type:

Total Bank deposits that exceeded the FDIC insurance limit of $250,000 or were not collateralized at September 30, 2024 and June 30, 2024 were $2.3 billion and $2.1 billion, respectively. The maturities of time deposits that exceeded the FDIC insurance limit were as follows:

Borrowings

The following table sets forth the composition of our borrowings and the interest rates:

We regularly use advances from the FHLB to manage our interest rate risk and, to a lesser extent, manage our liquidity position. Generally, FHLB advances with terms between three and ten years have been used to fund the origination of loans and to provide us with interest rate risk protection should rates rise. On July 15, 2024, the Company paid $2.6 million to repurchase $3.0 million par value of its 4.00% Fixed-to-Floating Rate Subordinated Notes due March 1, 2032. On September 27, 2024, the Company paid $9.2 million to repurchase $9.5 million par value of its 4.875% Fixed-to-Floating Rate Subordinated Notes due October 1, 2030. For additional information see Note 11—“Borrowings, Subordinated Notes and Debentures”in the accompanying interim condensed consolidated financial statements.

Stockholders’ Equity

Stockholders’ equity increased $115.1 million to $2,405.7 million at September 30, 2024, compared to $2,290.6 million at June 30, 2024. The increase was primarily the result of net income for the three months ended September 30, 2024 of $112.3 million.