Axos Financial, Inc. Announces Record Net Income of $215.7 million for Fiscal 2021

Axos Financial, Inc. (NYSE: AX) ("Axos"), parent company of Axos Bank (the "Bank"), today announced unaudited financial results for the fourth fiscal quarter and full fiscal year ended June 30, 2021. Net income for the quarter was $54.3 million, an increase of 19.8% over net income of $45.3 million for the quarter ended June 30, 2020. Earnings attributable to Axos' common stockholders were $54.3 million or $0.90 per diluted share for the fourth quarter of fiscal 2021, an increase of 20.0% from $45.2 million or $0.75 per diluted share for the fourth quarter ended June 30, 2020.

Adjusted earnings and adjusted earnings per diluted common share ("Adjusted EPS"), non-GAAP measures, which exclude non-cash amortization expenses and other non-recurring costs increased 18.6% to $55.8 million and 17.9% to $0.92, respectively, for the quarter ended June 30, 2021 compared to $47.1 million and $0.78, respectively, for the quarter ended June 30, 2020.

Fourth Quarter Fiscal 2021 Financial Summary:

For the fiscal year ended June 30, 2021, net income was a record $215.7 million, an increase of 17.6% over net income of $183.4 million for the twelve months ended June 30, 2020. Earnings attributable to Axos' common stockholders were $215.5 million or $3.56 per diluted share for the twelve months ended June 30, 2021, an increase of 17.7% from $183.1 million or $2.98 per diluted share for the twelve months ended June 30, 2020. Record earnings for the fiscal year ended June 30, 2021 were primarily the result of growth in interest-earning assets and reduced cost of interest-earning liabilities. Operating expenses increased to support growth of the Bank due to higher levels of loan originations and deposit activities.

"We finished the year with strong net interest income growth of 4.4% over the linked quarter and 20.8% year-over-year as a result of solid growth in average assets and a stable net interest margin," stated Greg Garrabrants, President and Chief Executive Officer of Axos. "Our Securities Business generated double-digit growth in margin balances and stock lending, resulting in a $0.5 million pretax income contribution this quarter. We see tremendous opportunities to deliver positive operating leverage in our securities clearing and custody businesses as we expand our product capabilities and scale."

"We generated solid loan growth of 3.4% over the linked quarter and 20.3% year-over-year excluding single-family jumbo mortgages and single-family warehouse loans," stated Andy Micheletti, Executive Vice President and Chief Financial Officer of Axos. "Our credit quality remains good, with 7 basis points of net annualized charge-offs to average loans excluding seasonal tax loan products in our fiscal 2021. We had another strong year in returns, with a ROE of 16.51% and a ROA of 1.52% for the twelve months ended June 30, 2021."

Other Highlights:

• Net interest margin was 3.92%, up 3 basis points from 3.89% for the three months ended June 30, 2020
• Average funding costs were 61 basis points for the three months ended June 30, 2021 compared to 1.25% for the three months ended June 30, 2020
• Pretax income for the Securities Business was $0.5 million compared to a pretax loss of $1.6 million in the three months ended June 30, 2020
• Average loan balances for the three months ended June 30, 2021 grew $914.4 million, or 8.6%, compared to the three months ended June 30, 2020
• Loan originations for investment for the three months ended June 30, 2021 increased by 38.4% to $1,824.5 million compared to $1,317.8 million for the quarter ended June 30, 2020
• Return on average common stockholders' equity was 15.56% for the three months ended June 30, 2021
• Total net annualized charge-offs to average loans, excluding seasonal tax loan products, were 0.01% for the three months ended June 30, 2021
• Tangible book value increased to $21.36 per share, up 16.8% compared to June 30, 2020

Fourth Quarter Fiscal 2021 Income Statement Summary

During the quarter ended June 30, 2021, Axos earned $54.3 million or $0.90 per diluted share compared to $45.3 million, or $0.75 per diluted share for the quarter ended June 30, 2020. Net interest income increased $24.4 million or 20.8% for the quarter ended June 30, 2021 compared to June 30, 2020, primarily due to the lower cost of deposits and borrowing resulting from interest rate reductions and increases in non-interest-bearing demand deposits.

The provision for credit losses was $1.3 million for the quarter ended June 30, 2021 compared to $6.5 million for the quarter ended June 30, 2020. The decrease was primarily due to overall loan portfolio decline and changes in the loan mix.

For the fourth quarter ended June 30, 2021, non-interest income was $16.8 million compared to $28.7 million for the three months ended June 30, 2020. The decrease year over year was primarily the result of decreases in mortgage banking fee income of $9.8 million and a decrease in banking and service fees of $3.8 million, partially offset by an increase in prepayment penalty fee income of $1.7 million and an increase in broker-dealer fee income of $0.7 million.

Non-interest expense or operating costs increased $10.3 million to $81.9 million for the quarter ended June 30, 2021 from $71.5 million for the three months ended June 30, 2020. The increase was mainly a result of an increase in data processing of $4.1 million, due to software initiatives and enhancements to the Bank's core processing system. Additional contributors to the increase in operating expenses were an increase in other general and administrative of $2.9 million, an increase in professional services of $1.7 million, an increase of $1.0 million in broker-dealer clearing charges, an increase in occupancy and equipment related expenses of $1.0 million, and an increase in advertising and promotional expenses of $0.8 million.

Our effective tax rate was 27.99% for the three months ended June 30, 2021 compared to 33.31% for the three months ended June 30, 2020. The decrease in the tax rate for the three months ended June 30, 2021, is primarily due to a tax benefit from stock compensation during the quarter ended June 30, 2021, compared to a write off of a deferred tax asset for stock compensation that wasn't expected to be realized in the future, which resulted in $2.0 million of additional expense for the three months ended June 30, 2020.

Full Year Fiscal 2021 Highlights

• Net income reached a record $215.7 million, an increase of 17.6% compared to the fiscal year ended June 30, 2020
• Earnings per diluted share outstanding were $3.56, up 19.5% from $2.98 in the fiscal year ended June 30, 2020
• Loan originations for investment for the fiscal year ended June 30, 2021 were $7,304.4 million, up 7.4% compared to the fiscal year ended June 30, 2020
• Net interest margin for the Banking Business decreased to 4.11% for the fiscal year ended June 30, 2021 compared to 4.19% for the fiscal year ended June 30, 2020
• Mortgage banking income increased by 104.2% to $42.2 million for the twelve months ended June 30, 2021
• Efficiency for the Banking Business was 41.95% for the fiscal year ended June 30, 2021 compared to 39.81% for the fiscal year ended June 30, 2020
• Return on average assets remained strong at 1.52% for the fiscal year ended June 30, 2021

Balance Sheet Summary

Axos' total assets increased $413.7 million, or 3.0%, to $14,265.6 million, as of June 30, 2021, up from $13,851.9 million at June 30, 2020. The loan portfolio increased $783.5 million or 7.4% on a net basis. Total cash decreased by $912.7 million primarily due to decreased deposits. Total liabilities increased by $243.6 million, or 1.9%, to $12,864.6 million at June 30, 2021, up from $12,621.1 million at June 30, 2020. The increase in total liabilities resulted primarily from growth in securities loaned of $473.0 million, advances from the Federal Home Loan Bank of $111.0 million and customer and broker-dealer payables of $187.8 million, partially offset by decreased deposits of $520.9 million. Stockholders' equity increased by $170.1 million, or 13.8%, to $1,400.9 million at June 30, 2021 from $1,230.8 million at June 30, 2020. The increase was primarily the result of $215.7 million in net income and $10.0 million of vesting and issuance of RSUs and stock-based compensation expense, partially offset by a $37.0 million adjustment to retained earnings for the adoption of ASC 326, $16.8 million of stock repurchases, $5.2 million for redemption of series-A preferred stock, $3.4 million of unrealized loss in other comprehensive income, net of tax, and $0.1 million of dividends declared on preferred stock.

The Bank's Tier 1 core capital to adjusted average assets ratio was 9.45% at June 30, 2021.

Conference Call

A conference call and webcast will be held on Thursday, July 29, 2021 at 5:00 PM Eastern / 2:00 PM Pacific. Analysts and investors may dial in and participate in the question/answer session. To access the call, please dial: 877-407-8293. The conference call will be webcast live and may be accessed at Axos' website, http://www.axosfinancial.com. For those unable to listen to the live broadcast, a replay will be available until August 29, 2021, at Axos' website and telephonically by dialing toll-free number 877-660-6853, passcode 13721053.

About Axos Financial, Inc. and subsidiaries

The condensed consolidated financial statements include the accounts of Axos Financial, Inc. ("Axos") and its wholly owned subsidiaries, Axos Bank (the "Bank") and Axos Nevada Holding, LLC ("Axos Nevada Holding" and collectively, the "Company"). Axos Nevada Holding wholly owns its subsidiary Axos Securities, LLC, which wholly owns subsidiaries Axos Clearing LLC, a clearing broker-dealer, Axos Invest, Inc., a registered investment advisor, and Axos Invest LLC, an introducing broker-dealer. With approximately $14.3 billion in assets, Axos Bank provides consumer and business banking products through its low-cost distribution channels and affinity partners. Axos Clearing LLC and Axos Invest, Inc. provide comprehensive securities clearing services to introducing broker-dealers and registered investment advisor correspondents, and digital investment advisory services to retail investors, respectively. Axos Financial, Inc.'s common stock is listed on the NYSE under the symbol "AX" and is a component of the Russell 2000^® Index and the S&P SmallCap 600^® Index. For more information on Axos Bank, please visit axosbank.com.

SEGMENT REPORTING

The Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to the Company's financial condition and operating results and the CEO's evaluation of the operating results of those services in deciding how to allocate resources and assess performance. The Company operates through two segments: Banking Business and Securities Business. In order to reconcile the two segments to the consolidated totals, the Company includes parent-only activities and intercompany eliminations.

The following tables present the operating results of the segments and reconciliations:

Use of Non-GAAP Financial Measures

In addition to the results presented in accordance with GAAP, this report includes non-GAAP financial measures such as adjusted earnings, adjusted earnings per diluted common share, and tangible book value per common share. Non-GAAP financial measures have inherent limitations, may not be comparable to similarly titled measures used by other companies and are not audited. Readers should be aware of these limitations and should be cautious as to their reliance on such measures. Although we believe the non-GAAP financial measures disclosed in this report enhance investors' understanding of our business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.

We define "adjusted earnings", a non-GAAP financial measure, as net income without the after-tax impact of non-recurring acquisition-related costs and other costs (unusual or non-recurring charges), as adjusted earnings, a non-GAAP financial measure. Adjusted earnings per diluted common share ("adjusted EPS"), a non-GAAP financial measure, is calculated by dividing non-GAAP adjusted earnings by the average number of diluted common shares outstanding during the period. We believe the non-GAAP measures of adjusted earnings and adjusted EPS provide useful information about the Bank's operating performance. We believe excluding the non-recurring acquisition related costs and other (unusual or non-recurring) costs provides investors with an alternative understanding of Axos' core business.

Below is a reconciliation of net income, the nearest compatible GAAP measure, to adjusted earnings and adjusted EPS (Non-GAAP) for the periods shown:

We define "tangible book value", a non-GAAP financial measure, as book value adjusted for goodwill and other intangible assets. Tangible book value is calculated using common stockholders' equity minus mortgage servicing rights, goodwill and other intangible assets. Tangible book value per common share, a non-GAAP financial measure, is calculated by dividing tangible book value by the common shares outstanding at the end of the period. We believe tangible book value per common share is useful in evaluating the Company's capital strength, financial condition, and ability to manage potential losses.

Below is a reconciliation of total stockholders' equity to tangible book value (Non-GAAP) as of the dates indicated:

Forward-Looking Safe Harbor Statement

This press release contains forward-looking statements that involve risks and uncertainties, including without limitation statements relating to Axos' financial prospects and other projections of its performance and asset quality, Axos' ability to continue to grow profitably and increase its business, following closing, Axos' ability to integrate E*TRADE Advisor Services and realize the benefits of the transaction, Axos' ability to continue to diversify its lending and deposit franchises and the anticipated timing and financial performance of other offerings, initiatives, and acquisitions. These forward-looking statements are made on the basis of the views and assumptions of management regarding future events and performance as of the date of this press release. Actual results and the timing of events could differ materially from those expressed or implied in such forward-looking statements as a result of risks and uncertainties, including without limitation uncertainties surrounding the severity, duration, and effects of the COVID-19 pandemic, Axos' ability to successfully integrate acquisitions and realize the anticipated benefits of the transactions, changes in the interest rate environment, inflation, government regulation, general economic conditions, conditions in the real estate markets in which we operate, risks associated with credit quality, the outcome and effects of pending class action litigation filed against the Company and other factors beyond our control. These and other risks and uncertainties detailed in Axos' periodic reports filed with the Securities and Exchange Commission could cause actual results to differ materially from those expressed or implied in any forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and Axos undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this press release.

The following tables set forth certain selected financial data concerning the periods indicated: