UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period ended March 31, 2020

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37709

AXOS FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0867444
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9205 West Russell Road, STE 400, Las Vegas, NV                     89148

(Address of principal executive offices)                    (zip code)

Registrant’s telephone number, including area code: (858) 649-2218

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	AX	New York Stock Exchange
6.25% Subordinated Notes Due 2026	AXO	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

__________________________________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    ☐  Yes    ☒  No

The number of shares outstanding of the registrant’s common stock on the last practicable date: 59,655,664 shares of common stock, $0.01 par value per share, as of April 24, 2020.

AXOS FINANCIAL, INC.

INDEX

	Page
PART I – FINANCIAL INFORMATION	1
ITEM 1.       FINANCIAL STATEMENTS	1
Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2020 and June 30, 2019	1
Condensed Consolidated Statements of Income (unaudited) for the three and nine months ended March 31, 2020 and 2019	2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended March 31, 2020 and 2019	3
Condensed Consolidated Statement of Stockholders’ Equity (unaudited) for the three and nine months ended March 31, 2020 and 2019	4
Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended March 31, 2020 and 2019	6
Notes to Condensed Consolidated Financial Statements	8
ITEM 2.        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	36
SELECTED FINANCIAL DATA	40
RESULTS OF OPERATIONS	42
FINANCIAL CONDITION	54
LIQUIDITY	59
OFF-BALANCE SHEET COMMITMENTS AND CONTRACTUAL OBLIGATIONS	60
CAPITAL RESOURCES AND REQUIREMENTS	61
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	63
ITEM 3:       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS	66
ITEM 4:       CONTROLS AND PROCEDURES	66
PART II – OTHER INFORMATION	67
ITEM 1.       LEGAL PROCEEDINGS	67
ITEM 1A.    RISK FACTORS	67
ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	68
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	68
ITEM 4.     MINE SAFETY DISCLOSURES	68
ITEM 5.       OTHER INFORMATION	68
ITEM 6.       EXHIBITS	68
SIGNATURES	69

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except par and stated value)	March 31, 2020			June 30, 2019
ASSETS
Cash and cash equivalents	$	671,744		$	511,225
Cash segregated for regulatory purposes	182,455			346,143
Total cash, cash equivalents, and cash segregated	854,199			857,368
Securities:
Trading	919			—
Available-for-sale	191,388			227,513
Stock of regulatory agencies	23,833			20,276
Loans held for sale, carried at fair value	40,236			33,260
Loans held for sale, lower of cost or fair value	29			4,800
Loans and leases—net of allowance for loan and lease losses of $87,097 as of March 31, 2020 and $57,085 as of June 30, 2019	10,372,921			9,382,124
Mortgage servicing rights, carried at fair value	9,962			9,784
Other real estate owned and repossessed vehicles	7,307			7,485
Goodwill and other intangible assets—net	127,962			134,893
Securities borrowed	53,816			144,706
Customer, broker-dealer and clearing receivables	187,353			203,192
Other assets	289,994			194,837
TOTAL ASSETS	$	12,159,919		$	11,220,238
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	2,328,660		$	1,441,930
Interest bearing	7,238,678			7,541,243
Total deposits	9,567,338			8,983,173
Advances from the Federal Home Loan Bank	770,500			458,500
Borrowings, subordinated notes and debentures	76,285			168,929
Securities loaned	76,587			198,356
Customer, broker-dealer and clearing payables	318,100			238,604
Accounts payable and accrued liabilities and other liabilities	166,657			99,626
Total liabilities	10,975,467			10,147,188
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS’ EQUITY:
Preferred stock—$0.01 par value; 1,000,000 shares authorized:
Series A—$10,000 stated value and liquidation preference per share; 515 shares issued and outstanding as of March 31, 2020 and June 30, 2019	5,063			5,063
Common stock—$0.01 par value; 150,000,000 shares authorized; 67,084,817 shares issued and 59,653,192 shares outstanding as of March 31, 2020; 66,563,922 shares issued and 61,128,817 shares outstanding as of June 30, 2019	671			666
Additional paid-in capital	406,731			389,945
Accumulated other comprehensive income (loss)—net of tax	(2,726		)	16
Retained earnings	964,076			826,170
Treasury stock, at cost; 7,431,625 shares as of March 31, 2020 and 5,435,105 shares as of June 30, 2019	(189,363		)	(148,810		)
Total stockholders’ equity	1,184,452			1,073,050
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	12,159,919		$	11,220,238

See accompanying notes to the condensed consolidated financial statements.

1

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) 

	Three Months Ended					Nine Months Ended
	March 31,					March 31,
(Dollars in thousands, except earnings per common share)	2020		2019			2020		2019
INTEREST AND DIVIDEND INCOME:
Loans and leases, including fees	$	175,065	$	157,181		$	445,554	$	397,049
Securities borrowed and customer receivables	3,818		3,970			13,025		3,970
Investments	6,180		8,057			20,117		22,225
Total interest and dividend income	185,063		169,208			478,696		423,244
INTEREST EXPENSE:
Deposits	31,254		29,719			102,974		84,385
Advances from the Federal Home Loan Bank	3,952		8,366			10,211		26,848
Securities loaned	115		1,038			564		1,038
Other borrowings	1,126		916			4,608		2,805
Total interest expense	36,447		40,039			118,357		115,076
Net interest income	148,616		129,169			360,339		308,168
Provision for loan and lease losses	28,500		19,000			35,700		24,550
Net interest income, after provision for loan and lease losses	120,116		110,169			324,639		283,618
NON-INTEREST INCOME:
Realized gain (loss) on sale of securities	—		—			—		(133		)
Other-than-temporary loss on securities:
Other-than-temporary loss on securities:	—		(1,666		)	—		(1,666		)
Less: Portion of other temporary impairment losses recognized in OCI	—		845			—		845
Change to net impairment losses recognized in earnings on securities	—		(821		)	—		(821		)
Prepayment penalty fee income	1,406		706			4,824		4,077
Gain on sale – other	608		535			6,354		5,611
Mortgage banking income	2,955		352			7,973		2,959
Broker-dealer fee income	6,329		5,036			17,540		5,036
Banking and service fees	20,244		20,290			37,594		42,804
Total non-interest income	31,542		26,098			74,285		59,533
NON-INTEREST EXPENSE:
Salaries and related costs	36,257		33,716			106,932		93,524
Data processing	6,563		7,144			21,784		16,792
Depreciation and amortization	6,197		4,765			17,461		11,348
Advertising and promotional	3,887		3,635			11,720		11,265
Professional services	3,231		4,286			7,932		8,489
Occupancy and equipment	2,919		2,584			8,879		5,983
FDIC and regulatory fees	2,013		2,133			3,143		6,587
Broker-dealer clearing charges	2,180		1,095			6,048		1,095
General and administrative expense	8,543		22,457			20,323		30,587
Total non-interest expense	71,790		81,815			204,222		185,670
INCOME BEFORE INCOME TAXES	79,868		54,452			194,702		157,481
INCOME TAXES	23,811