Edward Hemmelgarn • Shaker Investments

Question 1

Edward Hemmelgarn's questions to Axos Financial Inc (AX) leadership • Q3 2025

Apr 30, 2025

Question

Edward Hemmelgarn questioned the company's high equity levels and loan loss provisions, asking if it reflected increased conservatism. He also requested more detail on increased IT spending and specific examples of AI deployment.

Answer

CEO Gregory Garrabrants explained that higher equity ratios are a result of both a strategic decision to maintain a strong balance sheet and a natural shift in the asset mix toward higher risk-weighted assets. He and CFO Derrick Walsh clarified that the loan loss provision is heavily influenced by the forward-looking CECL model and external economic forecasts, not just current performance. Mr. Garrabrants provided AI examples, including using low-code platforms to accelerate development, AI for improving the software development lifecycle, and extracting structured data from unstructured documents.

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Question 2

Edward Hemmelgarn's questions to Axos Financial Inc (AX) leadership • Q1 2025

Oct 25, 2024

Question

Edward Hemmelgarn of Shaker Investments asked about the percentage of the loan book in participations versus direct originations, whether underwriting is stronger on direct deals, and if the bank's net interest margin (NIM) would eventually revert to its historical 3.8%-4.0% range.

Answer

President and CEO Greg Garrabrants explained that the mix of direct versus syndicated loans varies greatly by business line. He affirmed his belief that underwriting is stronger on direct deals, contrasting the specific risks of C&I lending with the bank's highly structured, low-LTV commercial real estate lending. Regarding the NIM, he stated that structural changes, including a stronger commercial deposit franchise, support a new, higher range of 4.25% to 4.35% (excluding FDIC benefits), making the old range outdated.