Axos Financial NIM Drops to 4.57% with $5.5B Deposit Acquisition
AX•Axos Financial’s non-performing assets rose by $33 million due to a delinquent syndicated C&I loan, while average loan yields slid to 7.23% from 7.63%, driving net interest margin down to 4.57%. The bank secured $5.5 billion in deposits from Jenius and Capital One, drove net loan growth of $700 million, and saw non-interest income jump to $86 million.
1. Asset Quality Challenges
Axos Financial’s total non-performing assets in the commercial and industrial portfolio increased by $33 million sequentially due to a delinquent syndicated C&I loan, prompting a specific reserve build that drove the primary increase in the allowance for credit losses this quarter.
2. Loan Yields and Margin Pressure
Average yields on non-purchase loans declined to 7.23% from 7.63%, contributing to a drop in net interest margin to 4.57% from 4.94%, partly reflecting the impact of FDIC purchased loans and fewer days in the reporting period.
3. Strategic Deposit Acquisitions
The company agreed to acquire $2.3 billion of online savings deposits from Jenius Bank and $3.2 billion of IRA savings and certificates of deposit from Capital One, bolstering its liquidity and funding base for future loan growth without raising deposit pricing or marketing expenses.
4. Revenue and Profit Growth
Axos Financial reported non-interest income of $86 million, up from $53 million, driven by higher mortgage banking, advisory and rental income, while net interest income rose 11.2% year-over-year alongside net loan growth of $700 million and maintained return on average common equity above 16%.
