Axos Financial (AX) Buys CRE Loans From the FDIC, Stock Jumps
Shares of Axos Financial, Inc. AX soared 11.8% in response to its acquisition of commercial real estate (CRE) loans from the Federal Deposit Insurance Corporation ("FDIC"). Through its wholly-owned subsidiary Axos Bank, the company acquired two performing CRE loan portfolios worth $1.25 billion and included multi-family loans.
AX purchased the CRE loan portfolios at a price equal to almost 63% of the par value. Therefore, the company paid $789.5 million for these loans in cash.
As of Sep 30, 2023, AX had $6.17 billion worth of CRE loans and $2.13 billion of multi-family loans.
While buying these loan portfolios, Axos performed proper due diligence and valuation analysis on each of the properties in the acquired loan portfolios. The company noted that all 58 loans are current on principal and interest payments, and the recent appraisals received from the FDIC suggested a weighted average loan-to-value of roughly 59%.
Greg Garrabrants, president and CEO of Axos, said, “We believe that we purchased these performing loans at an attractive valuation that will be accretive to our net interest margin and net interest income.” In the first quarter of fiscal 2024, the company witnessed a 17% improvement in net interest income, and the net interest margin expanded 10 basis points to 4.36%.
Garrabrants further added, “The transaction value was enhanced by the inclusion of a series of back-to-back interest rate swaps that allow the borrowers to pay an average fixed rate of 3.8%, while Axos receives a primarily variable note rate of 6.9%.”
AX will likely be providing more detail related to “the allowance for credit losses, purchase accounting, and other aspects of the loan purchase” with its second-quarter fiscal 2024 financial results.
Shares of Axos have rallied 16.4% in the past three months, significantly outperforming the industry’s rise of 1.8%.
Image Source: Zacks Investment Research
Currently, AX carries a Zacks Rank of 3 (Hold).
Finance Stocks to Consider
A couple of better-ranked stocks from the finance space are Byline Bancorp BY and WisdomTree, Inc. WT.
Earnings estimates for BY have been revised 1.4% upward for 2023 over the past 30 days to $2.83. The company’s shares have gained 6.5% over the past three months. Byline Bancorp currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
WisdomTree’s earnings estimates have remained unchanged for the current year at 36 cents over the past 30 days. In three months’ time, WT’s shares have lost 9.1%. The company carries a Zacks Rank #2 at present.
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