Axos Financial Inc

Balance Sheet Analysis

Our total assets increased $1.3 billion, or 6.3%, to $21.6 billion, as of December 31, 2023, up from $20.3 billion at June 30, 2023. The increase in total assets was primarily due to an increase of $1.8 billion in loans, partially offset by a decrease in cash of $0.6 billion. Total liabilities increased $1.1 billion, primarily from an increase in deposits of $1.1 billion.

Loans

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

1 Includes PCD loans of $296.7 million in Multifamily and Commercial Mortgage and $44.5 million in Commercial Real Estate as of December 31, 2023. For further detail on PCD loans refer to Note 1—“Summary of Significant Accounting Policies”.

The Bank originates some single-family interest-only loans with terms that include repayments that are less than the repayments for fully amortizing loans. The Bank’s lending guidelines for interest only loans are adjusted for the increased credit risk associated with these loans by requiring borrowers with such loans to borrow at LTVs that are lower than standard amortizing ARM loans and by calculating debt to income ratios for qualifying borrowers based upon a fully amortizing payment, not the interest only payment. The Bank monitors and performs reviews of interest only loans as part of its loan portfolio management process. Adverse trends reflected in the Company’s delinquency statistics, grading and classification of interest only loans would be reported to management and the Board of Directors. As of December 31, 2023, the Company had $1.3 billion of interest-only mortgage loans with a weighted average LTV of 57.8%.

Asset Quality and Allowance for Credit Losses - Loans

Non-performing Assets

Non-performing loans are comprised of those 90 days or more past due and other non-accrual loans. Non-performing assets include non-performing loans plus, other real estate owned and repossessed vehicles. At December 31, 2023, our non-performing loans totaled $122.5 million, or 0.65% of total gross loans and our total non-performing assets totaled $129.8 million, or 0.60%, of total assets.

Non-performing loans and foreclosed assets or “non-performing assets” consisted of the following:

Total non-performing assets increased from $95.3 million at June 30, 2023 to $129.8 million at December 31, 2023. The increase in non-performing assets was primarily attributable to increases in single-family mortgage loans and commercial real estate.

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 six months ended December 31, 2023 was 0.02%, compared to 0.05% for the six months ended December 31, 2022. Of the 0.02% of net charge-offs for the three months ended December 31, 2023, 0.01% were related to Auto loans covered by insurance policies. For additional information regarding the Company’s allowance for credit losses see Note 5—“Loans and Allowance for Credit Losses” in the Condensed Consolidated Financial Statements. For a discussion of the provision for credit losses for the three and six months ended December 31, 2023, see “Results of Operations—Provision for Credit Losses.”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. The resolution of existing other real estate owned and non-performing loans should not have a significant adverse impact on our operating results.

Available-for-Sale Securities

Total available-for-sale securities were $239.8 million as of December 31, 2023, compared with $232.4 million at June 30, 2023. During the six months ended December 31, 2023, we purchased $9.6 million of securities and received principal repayments of approximately $6.0 million. The remainder of the change for the available-for-sale portfolio is attributable to changes in unrealized losses and accretion.

Deposits

Deposits increased by $1.1 billion, or 6.3%, to $18.2 billion at December 31, 2023, from $17.1 billion at June 30, 2023. Interest-bearing demand and savings increased $1.5 billion and time deposits decreased $0.3 billion. Non-interest bearing deposits decreased by $0.1 billion as of December 31, 2023, compared with June 30, 2023.

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

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

2 The total interest-bearing includes brokered deposits of $1,783.1 million and $2,028.5 million as of December 31, 2023 and June 30, 2023, respectively, of which $381.6 million and $690.9 million, respectively, are time deposits classified as $250,000 and under.

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 both December 31, 2023 and June 30, 2023 were $1.9 billion and 1.7 billion, respectively. The maturities of time deposits that exceeded the FDIC insurance limit of $250,000 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.

Stockholders’ Equity

Stockholders’ equity increased $161.1 million to $2,078.2 million at December 31, 2023, compared to $1,917.2 million at June 30, 2023. The increase was primarily the result of net income for the six months ended December 31, 2023 of $234.4 million partially offset by repurchases of $83.2 million of common shares.

During the six months ended December 31, 2023, the Company repurchased a total of $83.2 million or 2,255,509 shares of common stock at an average price of $36.88 share. The Company had $20.5 million remaining under the 2023 Board authorized stock repurchase program as of December 31, 2023.