Axos Financial Inc
For the period ended Jun 30, 2024. Filed Aug 22, 2024.
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FY2024 · Filed Aug 22, 2024
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6. Derivatives
- DERIVATIVES
The following table presents the fair values and notional amounts of the Company’s derivative instruments. While the notional amounts give an indication of the volume of the Company’s derivatives activity, the notional amounts significantly exceed, in the Company’s view, the possible losses that could arise from such transactions. For most derivative contracts, the notional amount is not exchanged, rather it is a reference amount used to calculate payments.
| Interest Rate Contracts | ||
|---|---|---|
| (Dollars in thousands) | As of June 30, 2024 | As of June 30, 2023 |
| Other Assets — Derivative Assets — Fair Value1 | $106,796 | $919 |
| Accounts Payable and Other Liabilities — Derivative Liabilities — Fair Value | $102,949 | $691 |
| Derivative Assets — Notional | $1,227,742 | $231,709 |
| Derivative Liabilities — Notional | $1,208,132 | $204,522 |
1 Other Assets — Derivative Assets as of June 30, 2024 include an $87.9 million from the FDIC related to the novation of certain interest rate swaps and are presented gross of $85.2 million of variation margin on centrally-cleared derivatives.
The following table presents the gains (losses) related to the Company’s derivative instrument activity recognized in the Consolidated Statements of Income:
| For the Fiscal Year Ended June 30, | |||
|---|---|---|---|
| (Dollars in thousands) | 2024 | 2023 | 2022 |
| Banking and service fees | $470 | $803 | $— |
| Mortgage banking and servicing rights income | $782 | $916 | $3,129 |
- OFFSETTING OF DERIVATIVES AND SECURITIES FINANCING AGREEMENTS
The Company enters into derivatives transactions as part of its mortgage banking activities, makes markets in interest rate swap and cap derivatives to facilitate customer demand, and enters into securities borrowed and securities loaned transactions to facilitate customer match-book activity, cover short positions and support customer securities lending. The Company manages credit exposure from certain of these transactions by entering into master netting agreements. The relevant agreements allow for the efficient closeout of transactions, liquidation and set-off of collateral against the net amount owed by the counterparty following a default. Default events generally include failure to pay, insolvency or bankruptcy of a counterparty.
The following tables present information about the offsetting of these instruments and related collateral amounts:
| June 30, 2024 | ||||||
|---|---|---|---|---|---|---|
| (Dollars in thousands) | Gross Assets / Liabilities | Amounts Offset | Net Balance Sheet Amount | Financial Collateral | Cash Collateral | Net Assets / Liabilities |
| Assets: | ||||||
| Securities borrowed | $67,212 | $— | $67,212 | $67,212 | $— | $— |
| Other Assets — Derivative Assets1 | 106,796 | — | 106,796 | 414 | 18,110 | 88,272 |
| Liabilities: | ||||||
| Securities loaned | $74,177 | $— | $74,177 | $74,177 | $— | $— |
| Accounts Payable and Other Liabilities — Derivative Liabilities | 102,949 | — | 102,949 | 414 | — | 102,535 |
| June 30, 2023 | |||||||
|---|---|---|---|---|---|---|---|
| (Dollars in thousands) · Gross Assets / Liabilities · Amounts Offset · Net Balance Sheet Amount · Financial Collateral · Net Assets / Liabilities | |||||||
| Assets: | |||||||
| Securities borrowed | $134,339 | $— | $134,339 | $134,339 | $— | ||
| Other Assets — Derivative Assets | 919 | — | 919 | — | 919 | ||
| Liabilities: | |||||||
| Securities loaned | $159,832 | $— | $159,832 | $159,832 | $— | ||
| Accounts Payable and Other Liabilities — Derivative Liabilities | 691 | 691 | 691 | ||||
1 Other Assets — Derivative Assets as of June 30, 2024 include an $87.9 million from the FDIC related to the novation of certain interest rate swaps and are presented gross of $85.2 million of variation margin on centrally-cleared derivatives.
The securities loaned transactions represent equities with an overnight and open maturity classification as of both periods presented.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.