Axos Financial, Inc. (AX) has consistently demonstrated its ability to generate strong financial results, with the company reporting annual net income of $307.2 million, annual revenue of $890.2 million, annual operating cash flow of $188.0 million, and annual free cash flow of $157.7 million in its latest fiscal year. This performance underscores Axos Financial's position as a leading diversified financial services company, with a focus on providing innovative banking, lending, and securities products and services to consumers and businesses nationwide.

Business Overview

Axos Financial's success is underpinned by its balanced and diversified business model, which includes a robust Banking Business segment and a thriving Securities Business segment. The Banking Business segment offers a wide range of consumer and commercial banking products, including deposit accounts, loans, and mortgage products, while the Securities Business segment provides clearing, custody, and other services to independent registered investment advisors (RIAs) and introducing broker-dealers.

Financials

In the latest quarter, Axos Financial reported net income of $110.7 million, or $1.91 per diluted share, representing a 38.7% year-over-year increase. The company's strong performance was driven by a 31.5% year-over-year increase in net interest income, which totaled $261.6 million for the quarter. This growth was primarily attributable to a 158 basis point increase in the average yield on loans, as well as a $2.9 billion increase in average loan balances.

Axos Financial's net interest margin (NIM) expanded significantly in the quarter, reaching 4.87%, up 45 basis points from the prior-year period and 32 basis points from the previous quarter. The company's NIM benefited from the accretion of purchase discounts related to the acquisition of loan portfolios from the Federal Deposit Insurance Corporation (FDIC) in December 2023, as well as higher yields on the company's loan portfolio.

Credit Quality

The company's credit quality remains strong, with net annualized charge-offs to average loans of just 7 basis points in the quarter. This includes 4 basis points of net charge-offs from auto loans covered by insurance policies, with the proceeds from those policies accounted for as fee income.

Deposit Growth

Axos Financial's deposit growth was also impressive, with the company increasing deposits by $900 million, or 20% annualized, in the quarter. Checking and savings accounts, which represent 80% of total deposits, grew even faster at 25% annualized. The company's deposit base remains well-diversified, with consumer and small business deposits accounting for 59% of the total, commercial cash and treasury management deposits at 24%, and other specialized deposit verticals making up the remainder.

Securities Business Segment

The company's Securities Business segment, which includes its Axos Clearing and Axos Advisor Services businesses, continues to make steady progress. Total assets under custody at Axos Clearing reached $35 billion at the end of the quarter, up from $34.4 billion at the end of the previous quarter. The pipeline for new custody clients remains healthy, with 237 advisory firms representing approximately $24 billion in combined assets under custody.

Outlook

Looking ahead, Axos Financial's management team remains confident in the company's ability to maintain its strong performance. The company has provided guidance for its net interest margin to remain above its previous range of 4.25% to 4.35%, driven by the accretion of purchase discounts from the FDIC loan acquisition. Additionally, the company expects to continue generating high single-digit to low double-digit organic loan growth, excluding the impact of any future acquisitions.

Conclusion

Axos Financial's diversified business model, strong credit quality, and prudent risk management have positioned the company well to navigate the current economic environment. The company's focus on innovation, technology, and customer service has also been a key driver of its success, allowing it to consistently outperform its peers in terms of loan, deposit, and earnings growth.

Overall, Axos Financial's impressive financial results, robust balance sheet, and promising outlook make it a compelling investment opportunity for investors seeking exposure to a well-managed, diversified financial services company with a track record of delivering consistent growth and shareholder value.