UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37709

AXOS FINANCIAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	33-0867444
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9205 West Russell Road, Suite 400, Las Vegas, NV 89148

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code: (858) 649-2218

Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	AX	New York Stock Exchange

__________________________________________________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No

The number of shares outstanding of the registrant’s common stock on the last practicable date: 57,732,167 shares of common stock, $0.01 par value per share, as of October 16, 2023.

AXOS FINANCIAL, INC.

INDEX

	Page
PART I – FINANCIAL INFORMATION	1
ITEM 1.       FINANCIAL STATEMENTS	1
Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2023 and June 30, 2023	1
Condensed Consolidated Statements of Income (unaudited) for the three months ended September 30, 2023 and 2022	2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three months ended September 30, 2023 and 2022	3
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three months ended September 30, 2023 and 2022	4
Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended September 30, 2023 and 2022	5
Notes to Condensed Consolidated Financial Statements	6
1. Summary of Significant Accounting Policies	6
2. Acquisitions	7
3. Fair Value	7
4. Securities	12
5. Loans & Allowance for Credit Losses	14
6. Stockholders' Equity and Stock-Based Compensation	20
7. Earnings per Common Share	21
8. Commitments and Contingencies	21
9. Segment Reporting and Revenue Information	23
ITEM 2.        MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
SELECTED FINANCIAL INFORMATION	28
RESULTS OF OPERATIONS	30
FINANCIAL CONDITION	36
LIQUIDITY	39
OFF-BALANCE SHEET COMMITMENTS	40
CAPITAL RESOURCES AND REQUIREMENTS	40
ITEM 3.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	42
ITEM 4.       CONTROLS AND PROCEDURES	44
PART II – OTHER INFORMATION	45
ITEM 1.       LEGAL PROCEEDINGS	45
ITEM 1A.    RISK FACTORS	45
ITEM 2.       UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES	45
ITEM 3.       DEFAULTS UPON SENIOR SECURITIES	45
ITEM 4.       MINE SAFETY DISCLOSURES	45
ITEM 5.       OTHER INFORMATION	45
ITEM 6.       EXHIBITS	46
SIGNATURES	47

PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

AXOS FINANCIAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except par and stated value)	September 30,  2023		June 30, 2023
ASSETS
Cash and cash equivalents	$	2,161,762	$	2,233,027
Cash segregated for regulatory purposes	252,007		149,059
Total cash, cash equivalents and cash segregated	2,413,769		2,382,086
Securities:
Trading	640		758
Available-for-sale	236,726		232,350
Stock of regulatory agencies	21,533		21,510
Loans held for sale, carried at fair value	8,014		23,203
Loans held for sale, lower of cost or fair value	—		776
Loans—net of allowance for credit losses of $170,870 as of September 30, 2023 and $166,680 as of June 30, 2023	16,955,041		16,456,728
Servicing rights, carried at fair value	29,338		25,443
Securities borrowed	96,424		134,339
Customer, broker-dealer and clearing receivables	285,423		374,074
Goodwill and other intangible assets—net	149,572		152,149
Other assets	628,726		545,053
TOTAL ASSETS	$	20,825,206	$	20,348,469
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing	2,875,432		2,898,150
Interest bearing	14,690,309		14,224,958
Total deposits	17,565,741		17,123,108
Advances from the Federal Home Loan Bank	90,000		90,000
Borrowings, subordinated notes and debentures	447,733		361,779
Securities loaned	116,446		159,832
Customer, broker-dealer and clearing payables	341,915		445,477
Accounts payable and other liabilities	287,163		251,114
Total liabilities	18,848,998		18,431,310
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS’ EQUITY:
Common stock—$0.01 par value; 150,000,000 shares authorized; 69,826,263 shares issued and 58,503,976 shares outstanding as of September 30, 2023; 69,465,446 shares issued and 58,943,035 shares outstanding as of June 30, 2023	698		695
Additional paid-in capital	486,676		479,878
Accumulated other comprehensive income (loss)—net of tax	(6,388)		(6,610)
Retained earnings	1,818,254		1,735,609
Treasury stock, at cost; 11,322,287 shares as of September 30, 2023 and 10,522,411 shares as of June 30, 2023	(323,032)		(292,413)
Total stockholders’ equity	1,976,208		1,917,159
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	20,825,206	$	20,348,469

See accompanying notes to the condensed consolidated financial statements.

1

AXOS FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited) 

	Three Months Ended
	September 30,
(Dollars in thousands, except earnings per common share)	2023		2022
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	326,974	$	208,338
Securities borrowed and customer receivables	4,995		4,384
Investments and other	31,983		11,064
Total interest and dividend income	363,952		223,786
INTEREST EXPENSE:
Deposits	146,110		32,505
Advances from the Federal Home Loan Bank	529		5,163
Securities loaned	449		943
Other borrowings	5,709		4,700
Total interest expense	152,797		43,311
Net interest income	211,155		180,475
Provision for credit losses	7,000		8,750
Net interest income, after provision for credit losses	204,155		171,725
NON-INTEREST INCOME:
Broker-dealer fee income	12,477		9,178
Advisory fee income	8,219		6,959
Banking and service fees	8,350		6,514
Mortgage banking and servicing rights income	3,878		3,365
Prepayment penalty fee income	1,583		1,192
Total non-interest income	34,507		27,208
NON-INTEREST EXPENSE:
Salaries and related costs	55,811		46,996
Data and operational processing	16,084		14,022
Depreciation and amortization	5,878		6,094
Advertising and promotional	10,375		6,370
Professional services	9,811		8,087
Occupancy and equipment	3,846		4,054
FDIC and regulatory fees	4,449		3,735
Broker-dealer clearing charges	4,012		2,829
General and administrative expense	10,240		23,900
Total non-interest expense	120,506		116,087
INCOME BEFORE INCOME TAXES	118,156		82,846
INCOME TAXES	35,511		24,439
NET INCOME	$	82,645	$	58,407
COMPREHENSIVE INCOME	$	82,867	$	55,570
Basic earnings per common share	$	1.40	$	0.98
Diluted earnings per common share	$	1.38	$	0.97

See accompanying notes to the condensed consolidated financial statements.

2

AXOS FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended
	September 30,
(Dollars in thousands)	2023		2022
NET INCOME	$	82,645	$	58,407
Net unrealized gain (loss) from available-for-sale securities, net of income tax expense (benefit) of $112 and $(1,215) for the three months ended September 30, 2023 and 2022, respectively.	222		(2,837)
Other comprehensive income (loss)	222		(2,837)
Comprehensive income	$	82,867	$	55,570

See accompanying notes to the condensed consolidated financial statements.

3

AXOS FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

	For the Three Months Ended September 30, 2023
		Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Retained Earnings		Treasury Stock		Total
		Number of Shares
(Dollars in thousands)		Issued	Treasury	Outstanding	Amount
BALANCE—June 30, 2023		69,465,446	(10,522,411)	58,943,035	$	695	$	479,878	$	(6,610)	$	1,735,609	$	(292,413)	$	1,917,159
Net income		—	—	—	—		—		—		82,645		—		82,645
Other comprehensive income (loss)		—	—	—	—		—		222		—		—		222
Purchase of treasury stock		—	(648,208)	(648,208)	—		—		—		—		(24,536)		(24,536)
Stock-based compensation activity		360,817	(151,668)	209,149	3		6,798		—		—		(6,083)		718
BALANCE—September 30, 2023		69,826,263	(11,322,287)	58,503,976	$	698	$	486,676	$	(6,388)	$	1,818,254	$	(323,032)	$	1,976,208

	For the Three Months Ended September 30, 2022
		Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Retained Earnings		Treasury Stock		Total
		Number of Shares
(Dollars in thousands)		Issued	Treasury	Outstanding	Amount
BALANCE—June 30, 2022		68,859,722	(9,081,773)	59,777,949	$	689	$	453,784	$	(2,933)	$	1,428,444	$	(237,011)	$	1,642,973
Net income		—	—	—	—		—		—		58,407		—		58,407
Other comprehensive income (loss)		—	—	—	—		—		(2,837)		—		—		(2,837)
Stock-based compensation activity		291,430	(70,706)	220,724	3		5,317		—		—		(2,891)		2,429
BALANCE—September 30, 2022		69,151,152	(9,152,479)	59,998,673	$	692	$	459,101	$	(5,770)	$	1,486,851	$	(239,902)	$	1,700,972

See accompanying notes to the condensed consolidated financial statements.

4

AXOS FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	Three Months Ended
	September 30,
(Dollars in thousands)	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	82,645	$	58,407
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	5,878		6,094
Other accretion and amortization	(3,101)		707
Stock-based compensation expense	6,802		5,320
Trading activity	118		1,683
Provision for credit losses	7,000		8,750
Deferred income taxes	3,526		(3,807)
Origination of loans held for sale	(50,607)		(70,073)
Unrealized and realized gains on loans held for sale	(1,796)		(2,433)
Proceeds from sale of loans held for sale	65,138		67,610
Changes in servicing rights	(3,448)		(953)
Net change in assets and liabilities which provide (use) cash:
Securities borrowed	37,915		251,358
Customer, broker-dealer and clearing receivables	88,651		61,015
Other Assets	(86,123)		(6,347)
Securities loaned	(43,386)		(267,511)
Customer, broker-dealer and clearing payables	(103,562)		(65,484)
Accounts payable and other liabilities	28,220		26,485
Net cash provided by operating activities	33,870		70,821
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale investment securities	(4,796)		—
Proceeds from sale and repayment of available-for-sale investment securities	718		1,029
Purchase of stock of regulatory agencies	—		(54,964)
Proceeds from redemption of stock of regulatory agencies	—		54,964
Origination of loans held for investment	(2,560,043)		(2,486,224)
Proceeds from sale of loans originally classified as held for investment	—		13,965
Mortgage warehouse loan activity, net	(45,289)		103,812
Proceeds from sale of other real estate owned and repossessed assets	918		719
Acquisition of business activity, net of cash acquired	—		(5,009)
Purchase of loans and leases, net of discounts and premiums	(51,892)		(51)
Principal repayments on loans	2,160,911		1,229,390
Purchases of furniture, equipment, software and intangibles	(6,492)		(7,921)
Net cash used in investing activities	(505,965)		(1,150,290)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	442,633		1,230,209
Repayments of the Federal Home Loan Bank term advances	—		(5,000)
Net (repayment) proceeds of other borrowings	85,700		(19,500)
Tax payments related to settlement of restricted stock units	(6,083)		(2,891)
Purchase of treasury stock	(18,472)		—
Net cash provided by financing activities	503,778		1,202,818
NET CHANGE IN CASH AND CASH EQUIVALENTS	31,683		123,349
CASH AND CASH EQUIVALENTS—Beginning of year	$	2,382,086	$	1,574,699
CASH AND CASH EQUIVALENTS—End of period	$	2,413,769	$	1,698,048
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on interest-bearing liabilities	152,359		42,429
Income taxes paid	52,664		37,277
Transfers to other real estate and repossessed vehicles from loans held for investment	1,847		5,522
Transfers from loans held for sale to loans and leases held for investment	2,783		682

See accompanying notes to the condensed consolidated financial statements.

5

AXOS FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2023 AND 2022

(Dollars in thousands, except per share and stated value amounts)

(Unaudited)

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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, the Bank and Axos Nevada Holding comprise substantially all of the Company’s assets and liabilities and revenues and expenses. Axos Bank and its wholly owned subsidiaries constitute the Banking Business segment and Axos Nevada Holding and its wholly owns the subsidiaries constitute the Securities Business segment. All significant intercompany balances and transactions have been eliminated in consolidation. The Notes to the Consolidated Financial Statements are an integral part of the Company’s financial statements.

The accompanying interim condensed consolidated financial statements, presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), are unaudited and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of financial condition and results of operations for the interim periods. All adjustments are of a normal and recurring nature. Certain amounts reported in prior periods have been reclassified to conform with the current presentation. Results for the three months ended September 30, 2023 are not necessarily indicative of results that may be expected for any other interim period or for the year as a whole. Certain information and note disclosures normally included in the audited annual financial statements prepared in accordance with GAAP have been condensed or not repeated herein pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) with respect to interim financial reporting. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended June 30, 2023 included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (“2023 Form 10-K”) filed with the SEC.

Significant Accounting Policies

For further information regarding the Company’s significant accounting policies see Note 1—“Organizations and Summary of Significant Accounting Policies” in the 2023 Form 10-K.

During the three months ended September 30, 2023 there were no significant updates to the Company’s significant accounting policies, other than as described below and for the adoption of the accounting standards noted herein.

New Accounting Standards

The Financial Accounting Standards Board (“FASB”) issued three Accounting Standards Updates (“ASUs”) (2020-04, 2021-04 and 2022-06) all of which provide guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contracts, hedging relationships, and other transactions impacted by reference rate reform. The provisions apply only to those transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. Adoption of the provisions are optional and are effective from March 12, 2020 through December 31, 2024. The Company adopted these ASUs on July 1, 2023, and there was no impact on its financial condition or results of operations upon adoption.

In March 2022, the FASB issued ASU 2022-02 which eliminates the accounting guidance for troubled debt restructurings by creditors that have adopted the current expected credit losses (“CECL”) model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. The Company adopted this ASU on a prospective basis on July 1, 2023, and there was no impact on its financial condition or results of operations upon adoption. See Note 5—“Loans & Allowance for Credit Losses” for the new disclosures as a result of the adoption of this accounting guidance.

6

2.     ACQUISITIONS

On August 23, 2023, the Company agreed to acquire approximately $52 million of marine floor financing loans at par value along with other assets for an additional $2 million, primarily consisting of servicing rights as well as certain employees. The transaction was accounted for as an asset acquisition and such assets are included in the Company’s unaudited Condensed Consolidated Balance Sheets as of September 30, 2023.

3.     FAIR VALUE

The following tables sets forth the Company’s financial assets and liabilities measured at fair value on a recurring basis at September 30, 2023 and June 30, 2023. Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement:

	September 30, 2023
(Dollars in thousands)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
ASSETS:
Securities—Trading		$	640	$	—	$	640
Securities—Available-for-sale:
Agency MBS1		27,624		—		27,624
Non-Agency MBS2		—		206,076		206,076
Municipal		3,026		—		3,026
Total—Securities—Available-for-sale		$	30,650	$	206,076	$	236,726
Loans held for sale		$	8,014	$	—	$	8,014
Servicing rights		$	—	$	29,338	$	29,338
Other assets—Derivative instruments		$	1,295	$	—	$	1,295
LIABILITIES:
Accrued expense and other liabilities—Derivative instruments		$	934	$	—	$	934
	June 30, 2023
(Dollars in thousands)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
ASSETS:
Securities—Trading		$	758	$	—	$	758
Securities—Available-for-sale:
Agency MBS1		23,947		—		23,947
Non-Agency MBS2		—		205,005		205,005
Municipal		3,398		—		3,398
Total—Securities—Available-for-sale		$	27,345	$	205,005	$	232,350
Loans held for sale		$	23,203	$	—	$	23,203
Servicing rights		$	—	$	25,443	$	25,443
Other assets—Derivative instruments		$	919	$	—	$	919
LIABILITIES:
Accrued expense and other liabilities—Derivative instruments		$	691	$	—	$	691

1 Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac.

2 Private sponsors of securities collateralized primarily by first-lien mortgage loans on commercial properties or by pools of 1-4 family residential first mortgages. Primarily super senior securities secured by Alt-A or pay-option adjustable rate mortgages (“ARMs”).

7

The following tables present additional information about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:

	For the Three Months Ended
	September 30, 2023
(Dollars in thousands)	Securities – Available-for-Sale: Non-Agency RMBS		Servicing Rights1		Total
Opening Balance	$	205,005	$	25,443	$	230,448
Total gains or losses for the period:
Included in earnings—Mortgage banking and servicing rights income	—		1,858		1,858
Included in other comprehensive income	1,316		—		1,316
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	—		2,037		2,037
Settlements	(245)		—		(245)
Closing balance	$	206,076	$	29,338	$	235,414
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	1,858	$	1,858

1 Earnings from servicing rights were attributable to: time and payoffs, representing a decrease in servicing rights value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $0.2 million for the three months ended September 30, 2023 and an increase in servicing rights value resulting from market-driven changes in interest rates of $2.1 million for the three months ended September 30, 2023. Additions to servicing rights were related to purchases and servicing rights retained upon sale of loans held for sale.

	For the Three Months Ended
	September 30, 2022
(Dollars in thousands)	Securities – Available-for-Sale: Non-Agency RMBS		Servicing Rights1		Derivative Instruments, net		Total
Opening Balance	$	186,814	$	25,213	$	464	$	212,491
Total gains or losses for the period:
Included in earnings—Mortgage banking and servicing rights income	—		953		71		1,024
Included in other comprehensive income	(2,473)		—		—		(2,473)
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	—		207		—		207
Settlements	(329)		—		—		(329)
Closing balance	$	184,012	$	26,373	$	535	$	210,920
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	953	$	71	$	1,024

1 Earnings from servicing rights were attributable to: time and payoffs, representing a decrease in servicing rights value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $0.4 million for the three months ended September 30, 2022 and an increase in servicing rights value resulting from market-driven changes in interest rates of $1.4 million for the three months ended September 30, 2022. Additions to servicing rights were retained upon sale of loans held for sale.

8

The table below summarizes the quantitative information about Level 3 fair value measurements as of the dates indicated:

	September 30, 2023
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
Securities – Non-agency MBS	$	206,076	Discounted Cash Flow	Projected Constant Prepayment Rate, Projected Constant Default Rate, Projected Loss Severity, Discount Rate over SOFR Swaps	0.0 to 58.1% (34.9%) 0.0 to 7.6% (2.4%) 0.0 to 68.7% (28.5%) 2.6 to 6.5% (2.6%)
Servicing Rights	$	29,338	Discounted Cash Flow	Projected Constant Prepayment Rate, Life (in years), Discount Rate	4.8 to 39.9% (13.0%) 1.7 to 15.8 (7.4) 9.5 to 11.5% (9.8%)

	June 30, 2023
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average)
Securities – Non-agency MBS	$	205,005	Discounted Cash Flow	Projected Constant Prepayment Rate, Projected Constant Default Rate, Projected Loss Severity, Discount Rate over LIBOR	0.0 to 59.7% (32.0%) 0.0 to 7.5% (2.4%) 0.0 to 68.7% (28.5%) 2.6 to 7.5% (2.7%)
Servicing Rights	$	25,443	Discounted Cash Flow	Projected Constant Prepayment Rate, Life (in years), Discount Rate	6.1 to 40.1% (12.6%) 1.8 to 10.9 (7.7) 9.5 to 11.5% (9.6%)

For mortgage-backed securities, significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the projected loss severity and a directionally opposite change in the assumption used for projected prepayment rates. For servicing rights, significant increases in projected prepayment rates or discount rates in isolation would result in a significantly lower fair value measurement, while a significant increase in expected life in isolation would result in a significantly higher fair value measurement. Generally, a change in the projected prepayment rates is accompanied by a directionally opposite change in expected life.

The aggregate fair value of loans held for sale, carried at fair value, contractual balance (including accrued interest), and unrealized gain were:

(Dollars in thousands)	September 30, 2023		June 30, 2023
Aggregate fair value	$	8,014	$	23,203
Contractual balance	7,878		22,844
Unrealized gain	$	136	$	359

The total interest income and amount of gains and losses from changes in fair value included in earnings for loans held for sale were:

	For the Three Months Ended
	September 30,
(Dollars in thousands)	2023		2022
Interest income	$	189	$	50
Change in fair value	(129)		91
Total	$	60	$	141

9

The table below summarizes assets measured for impairment on a non-recurring basis:

	September 30, 2023
(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Other real estate owned and repossessed vehicles:
Single family real estate	$	—	$	—	$	5,574	$	5,574
Multifamily real estate	—		—		1,392		1,392
Autos	$	—	$	—	$	1,813	$	1,813
Total	$	—	$	—	$	8,779	$	8,779
	June 30, 2023
(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Other real estate owned and repossessed vehicles:
Single family real estate	$	—	$	—	$	5,574	$	5,574
Multifamily real estate	—		—		1,392		1,392
Autos	—		—		1,133		1,133
Total	$	—	$	—	$	8,099	$	8,099

Other real estate owned and foreclosed assets, which are measured at the lower of carrying value or fair value less costs to sell, had a net carrying amount of $8.8 million at September 30, 2023, after write-downs of $0.4 million, and a net carrying amount of $8.1 million at June 30, 2023, after write-downs of $1.7 million.

The following table presents quantitative information about Level 3 fair value measurements for other real estate owned and repossessed vehicles measured at fair value on a non-recurring basis at the periods indicated:

	September 30, 2023
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average) 1
Other real estate owned and repossessed vehicles2:
Single family real estate	$	5,574	Sales comparison approach	Differences between the comparable sales	62.1 to 93.6% (62.1%)
Multifamily real estate	$	1,392	Sales comparison approach and income approach	Differences between the comparable sales and differences in net operating income expectations, capitalization rate	49.8% to 54.5% (49.8%)

	June 30, 2023
(Dollars in thousands)	Fair Value		Valuation Technique	Unobservable Input	Range (Weighted Average) 1
Other real estate owned and repossessed vehicles2:
Single family real estate	$	5,574	Sales comparison approach	Differences between the comparable sales	62.1 to 93.6% (62.1%)
Multifamily real estate	$	1,392	Sales comparison approach and income approach	Differences between the comparable sales and differences in net operating income expectations, capitalization rate	49.8 to 54.5%% (49.8%)

1 For other real estate owned and repossessed vehicles the ranges shown may vary positively or negatively based on the comparable sales reported in the current appraisal. In certain instances, the range can be significant due to small sample sizes and in some cases the asset being valued having limited comparable sales with similar characteristics at the time the current appraisal is conducted.

2 Repossessed vehicles are valued using third-party pricing information of comparable vehicle sales without adjustment.

10

Fair Value of Financial Instruments

Carrying amounts and estimated fair values of financial instruments at September 30, 2023 and June 30, 2023 were:

	September 30, 2023
			Fair Value
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:
Cash and cash equivalents	$	2,413,769	$	2,413,769	$	—	$	—	$	2,413,769
Securities—trading	640		—		640		—		640
Securities—available-for-sale	236,726		—		30,650		206,076		236,726
Stock of regulatory agencies	21,533		—		21,533		—		21,533
Loans held for sale, at fair value	8,014		—		8,014		—		8,014
Loans held for investment—net	16,955,041		—		—		16,935,835		16,935,835
Securities borrowed	96,424		—		—		102,084		102,084
Customer, broker-dealer and clearing receivables	285,423		—		—		294,499		294,499
Servicing rights	29,338		—		—		29,338		29,338
Other assets - derivative instruments	1,295		—		1,295		—		1,295
Financial liabilities:
Total deposits	17,565,741		—		17,481,019		—		17,481,019
Advances from the Federal Home Loan Bank	90,000		—		82,234		—		82,234
Borrowings, subordinated notes and debentures	447,733		—		414,462		—		414,462
Securities loaned	116,446		—		—		116,097		116,097
Customer, broker-dealer and clearing payables	341,915		—		—		341,915		341,915
Accrued expense and other liabilities - derivative instruments	934		—		934		—		934

	June 30, 2023
			Fair Value
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:
Cash and cash equivalents	$	2,382,086	$	2,382,086	$	—	$	—	$	2,382,086
Securities—trading	758		—		758		—		758
Securities—available-for-sale	232,350		—		27,345		205,005		232,350
Stock of regulatory agencies	21,510		—		21,510		—		21,510
Loans held for sale, at fair value	23,203		—		23,203		—		23,203
Loans held for sale, at lower of cost or fair value	776		—		—		780		780
Loans held for investment—net	16,456,728		—		—		16,417,183		16,417,183
Securities borrowed	134,339		—		—		143,461		143,461
Customer, broker-dealer and clearing receivables	374,074		—		—		386,082		386,082
Servicing rights	25,443		—		—		25,443		25,443
Other assets - derivative instruments	919		—		919		—		919
Financial liabilities:
Total deposits	17,123,108		—		17,064,084		—		17,064,084
Advances from the Federal Home Loan Bank	90,000		—		83,192		—		83,192
Borrowings, subordinated notes and debentures	361,779		—		327,564		—		327,564
Securities loaned	159,832		—		—		159,416		159,416
Customer, broker-dealer and clearing payables	445,477		—		—		445,447		445,447
Accrued expense and other liabilities - derivative instruments	691		—		691		—		691

Carrying amount is the estimated fair value for cash and cash equivalents, stock of regulatory agencies, interest bearing deposits, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans, deposits, borrowings or subordinated debt and for variable rate loans, deposits, borrowings or subordinated debt with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. A discussion of the methods of valuing trading securities, available for sale securities, loans held for sale and derivatives can be found in Note 3—“Fair Value” of the 2023 Form 10-K. The fair value of off-balance sheet items is not material.

11

4.     SECURITIES

The amortized cost, carrying amount and fair value for the securities available-for-sale for the following periods were:

	September 30, 2023
	Trading		Available-for-sale
(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (MBS):
U.S. agencies1	$	—	$	31,277	$	1	$	(3,654)	$	27,624
Non-agency2	—		210,027		723		(4,674)		206,076
Total mortgage-backed securities	—		241,304		724		(8,328)		233,700
Non-MBS:
Municipal	640		3,689		—		(663)		3,026
Total Non-MBS	640		3,689		—		(663)		3,026
Total debt securities	$	640	$	244,993	$	724	$	(8,991)	$	236,726
	June 30, 2023
	Trading		Available-for-sale
(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (MBS):
U.S. agencies1	$	—	$	27,024	$	—	$	(3,077)	$	23,947
Non-agency2	—		210,271		711		(5,977)		205,005
Total mortgage-backed securities	—		237,295		711		(9,054)		228,952
Non-MBS:
Municipal	758		3,656		—		(258)		3,398
Total Non-MBS	758		3,656		—		(258)		3,398
Total debt securities	$	758	$	240,951	$	711	$	(9,312)	$	232,350

1 Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac.

2 Private sponsors of securities collateralized primarily by first-lien mortgage loans on commercial properties or by pools of 1-4 family residential first mortgages. Primarily super senior securities secured by Alt-A or pay-option ARM mortgages.

No credit losses were recognized on available-for-sale securities in the three months ended September 30, 2023 and September 30, 2022. Based on the underlying government guarantees and other credit protection supporting our securities, no allowance for credit losses for available-for-sale debt securities was recorded at September 30, 2023 and June 30, 2023. The Company has no allowance for the available-for-sale debt securities in an unrealized loss position based on an analysis of: (1) the credit characteristics of the securities, including the forecasted cash flows, credit ratings, credit enhancement, and external government backing, as applicable, and (2) whether the Company is intending to sell or is required to sell any securities before recovering the amortized cost basis of the securities. The unrealized losses on available-for-sale securities are primarily driven by the increase in interest rates since the securities were purchased.

The face amounts of available-for-sale debt securities pledged to secure borrowings at both September 30, 2023 and June 30, 2023 were $0.9 million.

During the three months ended September 30, 2023 and 2022, the Company sold no available-for-sale securities.

12

Securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, were:

	September 30, 2023
	Available-for-sale securities in loss position for
	Less Than 12 Months				More Than 12 Months				Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
MBS:
U.S. agencies	$	7,321	$	(174)	$	20,134	$	(3,480)	$	27,455	$	(3,654)
Non-agency	72,567		(53)		131,874		(4,621)		204,441		(4,674)
Total MBS	79,888		(227)		152,008		(8,101)		231,896		(8,328)
Non-MBS:
Municipal	—		—		3,026		(663)		3,026		(663)
Total Non-MBS	—		—		3,026		(663)		3,026		(663)
Total debt securities	$	79,888	$	(227)	$	155,034	$	(8,764)	$	234,922	$	(8,991)
	June 30, 2023
	Available-for-sale securities in loss position for
	Less Than 12 Months				More Than 12 Months				Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
MBS:
U.S. agencies	$	3,182	$	(16)	$	20,642	$	(3,061)	$	23,824	$	(3,077)
Non-agency	107,982		(1,808)		95,385		(4,169)		203,367		(5,977)
Total MBS	111,164		(1,824)		116,027		(7,230)		227,191		(9,054)
Non-MBS:
Municipal	—		—		3,398		(258)		3,398		(258)
Total Non-MBS	—		—		3,398		(258)		3,398		(258)
Total debt securities	$	111,164	$	(1,824)	$	119,425	$	(7,488)	$	230,589	$	(9,312)

The components of the Company’s accumulated other comprehensive income (loss) are as follows:

(Dollars in thousands)	September 30, 2023		June 30, 2023
Available-for-sale debt securities—net unrealized gains (losses)	$	(8,266)	$	(8,601)
Available-for-sale debt securities—non-credit related	(845)		(845)
Subtotal	(9,111)		(9,446)
Tax benefit (expense)	2,723		2,836
Net unrealized gain (loss) on investment securities in accumulated other comprehensive income (loss)	$	(6,388)	$	(6,610)

The following table sets forth the expected maturity distribution of our mortgage-backed securities, which is based on assumed prepayment rates, and the contractual maturity distribution of our non-MBS securities:

	At September 30, 2023
(Dollars in thousands)	Total Amount		Due Within One Year		Due after One but within Five Years		Due after Five but within Ten Years		Due After Ten Years
MBS:
Agency1	$	31,277	$	6,444	$	14,821	$	7,460	$	2,552
Non-Agency2	$	210,027	$	127,741	$	79,585	$	1,640	$	1,061
Total MBS	$	241,304	$	134,185	$	94,406	$	9,100	$	3,613
Non-MBS:
Municipal	$	3,689	$	—	$	—	$	—	$	3,689
Total Non-MBS	$	3,689	$	—	$	—	$	—	$	3,689
Available-for-sale—Amortized Cost	$	244,993	$	134,185	$	94,406	$	9,100	$	7,302
Available-for-sale—Fair value	$	236,726	$	130,977	$	91,040	$	8,203	$	6,506

1 Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac.

2 Private sponsors of securities collateralized primarily by pools of 1-4 family residential, Alt-A or pay-option ARM mortgages and commercial mortgages.

13

5.    LOANS & ALLOWANCE FOR CREDIT LOSSES

The Company categorizes the loan portfolio into six segments: Single Family - Mortgage & Warehouse, Multifamily and Commercial Mortgage, Commercial Real Estate, Commercial & Industrial - Non Real Estate, Auto & Consumer and Other. For further detail of the segments of the Company’s loan portfolio, refer to Note 1—“Organizations and Summary of Significant Accounting Policies” within the 2023 Form 10-K.

The following table sets forth the composition of the loan portfolio as of the dates indicated:

(Dollars in thousands)	September 30, 2023		June 30, 2023
Single Family - Mortgage & Warehouse	$	4,313,906	$	4,173,833
Multifamily and Commercial Mortgage	2,961,981		3,082,225
Commercial Real Estate	6,168,626		6,199,818
Commercial & Industrial - Non-RE	3,208,969		2,639,650
Auto & Consumer	506,011		546,264
Other	2,438		10,236
Total gross loans and leases	17,161,931		16,652,026
Allowance for credit losses - loans	(170,870)		(166,680)
Unaccreted premiums (discounts) and loan fees	(36,020)		(28,618)
Total net loans and leases	$	16,955,041	$	16,456,728

Accrued interest receivable on loans held for investments totaled $90.8 million and $77.9 million as of September 30, 2023 and June 30, 2023, respectively.

At September 30, 2023 and June 30, 2023, the Company has pledged certain loans totaling $5,172.6 million and $5,128.4 million, respectively, to the Federal Home Loan Bank (“FHLB”) and $3,642.6 million and $3,689.5 million, respectively, to the Federal Reserve Bank of San Francisco (“FRBSF”).

The following table presents the components of the provision for credit losses:

	For the Three Months Ended
	September 30,
(Dollars in thousands)	2023		2022
Provision for credit losses - loans	$	5,750	$	8,750
Provision for credit losses - unfunded lending commitments	1,250		—
Total provision for credit losses	$	7,000	$	8,750

The following tables summarize activity in the allowance for credit losses - loans by portfolio segment for the periods indicated.

	For the Three Months Ended September 30, 2023
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at July 1, 2023	$	17,503	$	16,848	$	72,755	$	46,347	$	13,212	$	15	$	166,680
Provision (benefit) for credit losses - loans	(10)		(974)		(1,400)		8,245		(105)		(6)		5,750
Charge-offs	(80)		—		—		—		(2,281)		—		(2,361)
Recoveries	13		—		—		—		788		—		801
Balance at September 30, 2023	$	17,426	$	15,874	$	71,355	$	54,592	$	11,614	$	9	$	170,870

	For the Three Months Ended September 30, 2022
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at July 1, 2022	$	19,670	$	14,655	$	69,339	$	30,808	$	14,114	$	31	$	148,617
Provision (benefit) for credit losses - loans	(1,642)		(6)		4,437		3,557		2,405		(1)		8,750
Charge-offs	(4)		—		—		—		(2,362)		—		(2,366)
Recoveries	15		—		—		18		438		—		471
Balance at September 30, 2022	$	18,039	$	14,649	$	73,776	$	34,383	$	14,595	$	30	$	155,472

14

For the three months ended September 30, 2023, the allowance for credit losses for loans increased primarily due to net loan growth, mainly in the Commercial & Industrial - Non-RE portfolio, and a shift in weighting towards the more adverse forecast scenarios reflecting uncertainty in the economic environment.

Loan products within each portfolio contain varying collateral types which impact the estimate of the loss given default utilized in the calculation of the allowance. For further discussion of the model method of estimating expected lifetime credit losses to Note 1—“Organizations and Summary of Significant Accounting Policies” within the 2023 Form 10-K.

The following tables present a summary of the activity in the allowance for credit losses for off-balance sheet lending commitments for the periods indicated:

	Three Months Ended September 30,
(Dollars in thousands)	2023		2022
BALANCE—beginning June 30	$	10,473	$	10,973
Provision for credit losses - unfunded lending commitments	1,250		—
BALANCE—end September 30	$	11,723	$	10,973

The increase in the allowance for off-balance sheet lending commitments at September 30, 2023 compared to June 30, 2023, was primarily driven by an increase in the amount of Commercial & Industrial - Non-RE unfunded commitments.

The following table presents loan-to-value (“LTV”) for the Company’s real estate loans outstanding as of September 30, 2023:

	Total Real Estate Loans		Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate
Weighted-Average LTV	48.9	%	57.3	%	53.6	%	40.7	%
Median LTV	54.0	%	56.9	%	50.0	%	41.6	%

The Company’s effective weighted-average LTV was 48.7% for real estate loans originated during the three months ended September 30, 2023.

Credit Quality Disclosures. The following tables provide the composition of loans that are performing and nonaccrual by portfolio segment as of the dates indicated:

	September 30, 2023
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	$	4,277,324	$	2,923,154	$	6,142,524	$	3,205,980	$	503,625	$	2,398	$	17,055,005
Nonaccrual	$	36,582	$	38,827	$	26,102	$	2,989	$	2,386	$	40	$	106,926
Total	$	4,313,906	$	2,961,981	$	6,168,626	$	3,208,969	$	506,011	$	2,438	$	17,161,931
Non accrual loans to total loans													0.62		%
	June 30, 2023
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	$	4,143,119	$	3,047,122	$	6,184,966	$	2,636,661	$	544,807	$	8,191	$	16,564,866
Nonaccrual	30,714		35,103		14,852		2,989		1,457		2,045		87,160
Total	$	4,173,833	$	3,082,225	$	6,199,818	$	2,639,650	$	546,264	$	10,236	$	16,652,026
Non accrual loans to total loans													0.52		%

There were no nonaccrual loans without an allowance for credit losses as of September 30, 2023 and June 30, 2023. There was no interest income recognized on nonaccrual loans in the three months ended September 30, 2023 and 2022.

Credit Quality Indicators. The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends. The Company analyzes loans individually by classifying the loans based on credit risk. The Company uses the following definitions for risk ratings.

Pass. Loans classified as pass are well protected by the current net worth and paying capacity of the obligor or by the fair value of any underlying collateral, less cost to acquire and sell in a timely manner.

15

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The Company reviews and grades loans following a continuous review process, featuring coverage of all loan types and business lines at least quarterly. Continuous reviewing provides more effective risk monitoring because it immediately tests for potential impacts caused by changes in personnel, policy, products or underwriting standards.

16

The following tables presents the composition of loans by portfolio segment, fiscal year of origination and credit quality indicator, and the amount of gross charge-offs for the three months ended September 30, 2023:

	September 30, 2023
	Loans Held for Investment Origination Year												Revolving Loans		Total
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior
Single Family-Mortgage & Warehouse
Pass	$	209,544	$	673,266	$	1,306,937	$	514,928	$	313,863	$	848,948	$	295,078	$	4,162,564
Special Mention	—		19,368		18,998		6,468		11,028		36,745		—		92,607
Substandard	—		—		8,965		4,590		14,345		30,835		—		58,735
Doubtful	—		—		—		—		—		—		—		—
Total	209,544		692,634		1,334,900		525,986		339,236		916,528		295,078		4,313,906
Gross charge-offs	—		—		—		—		—		80		—		80
Multifamily and Commercial Mortgage
Pass	9,328		478,469		974,390		479,725		299,551		597,311		—		2,838,774
Special Mention	—		10,719		—		2,000		1,358		—		—		14,077
Substandard	—		—		13,618		17,707		35,019		42,786		—		109,130
Doubtful	—		—		—		—		—		—		—		—
Total	9,328		489,188		988,008		499,432		335,928		640,097		—		2,961,981
Gross charge-offs	—		—		—		—		—		—		—		—
Commercial Real Estate
Pass	501,339		1,867,923		2,113,338		563,541		20,737		62,928		840,449		5,970,255
Special Mention	—		—		45,130		—		7,871		15,887		—		68,888
Substandard	—		—		45,242		38,902		15,000		30,339		—		129,483
Doubtful	—		—		—		—		—		—		—		—
Total	501,339		1,867,923		2,203,710		602,443		43,608		109,154		840,449		6,168,626
Gross charge-offs	—		—		—		—		—		—		—		—
Commercial & Industrial - Non-RE
Pass	248,136		416,819		287,067		28,675		9,041		5,866		2,129,452		3,125,056
Special Mention	—		6,806		35,430		—		10,986		—		12,046		65,268
Substandard	—		—		14,624		1,032		—		2,989		—		18,645
Doubtful	—		—		—		—		—		—		—		—
Total	248,136		423,625		337,121		29,707		20,027		8,855		2,141,498		3,208,969
Gross charge-offs	—		—		—		—		—		—		—		—
Auto & Consumer
Pass	10,130		148,607		234,996		62,579		21,381		24,704		—		502,397
Special Mention	—		338		576		69		26		58		—		1,067
Substandard	—		579		1,191		385		153		239		—		2,547
Doubtful	—		—		—		—		—		—		—		—
Total	10,130		149,524		236,763		63,033		21,560		25,001		—		506,011
Gross charge-offs	—		711		1,093		378		73		26		—		2,281
Other
Pass	905		—		—		1,190		—		303		—		2,398
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		40		—		—		—		40
Doubtful	—		—		—		—		—		—		—		—
Total	905		—		—		1,230		—		303		—		2,438
Gross charge-offs	—		—		—		—		—		—		—		—
Total
Pass	979,382		3,585,084		4,916,728		1,650,638		664,573		1,540,060		3,264,979		16,601,444
Special Mention	—		37,231		100,134		8,537		31,269		52,690		12,046		241,907
Substandard	—		579		83,640		62,656		64,517		107,188		—		318,580
Doubtful	—		—		—		—		—		—		—		—
Total	$	979,382	$	3,622,894	$	5,100,502	$	1,721,831	$	760,359	$	1,699,938	$	3,277,025	$	17,161,931
As a % of total gross loans	5.71%		21.11%		29.72%		10.03%		4.43%		9.91%		19.09%		100.0%
Total gross charge-offs	$	—	$	711	$	1,093	$	378	$	73	$	106	$	—	$	2,361

17

	June 30, 2023
	Loans Held for Investment Origination Year												Revolving Loans		Total
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior
Single Family-Mortgage & Warehouse
Pass	$	730,498	$	1,346,804	$	522,873	$	324,458	$	255,547	$	639,401	$	243,175	$	4,062,756
Special Mention	—		7,280		7,026		8,303		12,942		18,244		6,614		60,409
Substandard	—		5,188		4,686		14,384		2,024		24,386		—		50,668
Doubtful	—		—		—		—		—		—		—		—
Total	730,498		1,359,272		534,585		347,145		270,513		682,031		249,789		4,173,833
Multifamily and Commercial Mortgage
Pass	558,787		975,186		498,744		314,383		224,592		404,222		—		2,975,914
Special Mention	—		9,691		4,636		1,360		7,705		—		—		23,392
Substandard	—		3,145		5,686		38,857		6,181		29,050		—		82,919
Doubtful	—		—		—		—		—		—		—		—
Total	558,787		988,022		509,066		354,600		238,478		433,272		—		3,082,225
Commercial Real Estate
Pass	1,867,476		2,323,095		631,500		87,059		117,928		—		960,024		5,987,082
Special Mention	29,000		43,427		—		8,457		800		15,062				96,746
Substandard	—		29,200		37,951		18,500		15,487		14,852		—		115,990
Doubtful	—		—		—		—		—		—		—		—
Total	1,896,476		2,395,722		669,451		114,016		134,215		29,914		960,024		6,199,818
Commercial & Industrial - Non-RE
Pass	488,120		358,214		29,777		14,794		2,098		—		1,707,619		2,600,622
Special Mention	—		8,221		—		11,413		—		—		600		20,234
Substandard	—		17,762		1,032		—		—		—		—		18,794
Doubtful	—		—		—		—		—		—		—		—
Total	488,120		384,197		30,809		26,207		2,098		—		1,708,219		2,639,650
Auto & Consumer
Pass	161,831		256,154		70,223		24,906		19,897		9,929		—		542,940
Special Mention	423		632		453		60		14		6		—		1,588
Substandard	350		785		233		133		162		73		—		1,736
Doubtful	—		—		—		—		—		—		—		—
Total	162,604		257,571		70,909		25,099		20,073		10,008		—		546,264
Other
Pass	5,721		—		1,306		—		—		1,164		—		8,191
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		2,000		45		—		—		—		—		2,045
Doubtful	—		—		—		—		—		—		—		—
Total	5,721		2,000		1,351		—		—		1,164		—		10,236
Total
Pass	3,812,433		5,259,453		1,754,423		765,600		620,062		1,054,716		2,910,818		16,177,505
Special Mention	29,423		69,251		12,115		29,593		21,461		33,312		7,214		202,369
Substandard	350		58,080		49,633		71,874		23,854		68,361		—		272,152
Doubtful	—		—		—		—		—		—		—		—
Total	$	3,842,206	$	5,386,784	$	1,816,171	$	867,067	$	665,377	$	1,156,389	$	2,918,032	$	16,652,026
As a % of total gross loans	23.07%		32.35%		10.91%		5.21%		4.00%		6.94%		17.52%		100.0%

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses and evaluates credit quality based on the aging status of its loans. Certain short-term loans do not have a fixed maturity date and are treated as delinquent if not paid in full 90 days after the origination date.

18

The following tables provide the aging of loans by portfolio segment as of the dates indicated:

	September 30, 2023
(Dollars in thousands)	Current			30-59 Days			60-89 Days			90+ Days			Total
Single Family-Mortgage & Warehouse	$	4,227,936		$	26,362		$	11,118		$	48,490		$	4,313,906
Multifamily and Commercial Mortgage	2,921,752			6,307			—			33,922			2,961,981
Commercial Real Estate	6,126,237			800			—			41,589			6,168,626
Commercial & Industrial - Non-RE	3,208,969			—			—			—			3,208,969
Auto & Consumer	498,370			4,815			1,289			1,537			506,011
Other	2,227			211			—			—			2,438
Total	$	16,985,491		$	38,495		$	12,407		$	125,538		$	17,161,931
As a % of total gross loans	98.98		%	0.22		%	0.07		%	0.73		%	100.00		%

	June 30, 2023
(Dollars in thousands)	Current			30-59 Days			60-89 Days			90+ Days			Total
Single Family-Mortgage & Warehouse	$	4,102,150		$	20,832		$	7,971		$	42,880		$	4,173,833
Multifamily and Commercial Mortgage	3,048,217			2,705			1,124			30,179			3,082,225
Commercial Real Estate	6,173,716			11,250			—			14,852			6,199,818
Commercial & Industrial - Non-RE	2,639,650			—			—			—			2,639,650
Auto & Consumer	537,181			6,529			1,707			847			546,264
Other	8,024			68			1			2,143			10,236
Total	$	16,508,938		$	41,384		$	10,803		$	90,901		$	16,652,026
As a % of total gross loans	99.14		%	0.25		%	0.06		%	0.55		%	100.00		%

Loans reaching 90+ days past due are generally placed on non-accrual. As of September 30, 2023 and June 30, 2023, there were loans of $29.8 million and $14.1 million, respectively, over 90 days past due and still accruing interest as the Company expects to collect the principal and interest amounts due.

Single family mortgage loans in process of foreclosure were $18.0 million and $17.7 million as of September 30, 2023 and June 30, 2023, respectively.

    Loan Modifications to Borrowers Experiencing Financial Difficulty. The Company may grant certain modifications of loans to borrowers experiencing financial difficulty, which effective July 1, 2023, are reported as financial difficulty modifications (“FDMs”). The Company’s modification programs provide various modifications to borrowers experiencing financial difficulty which may include interest rate reductions, term extensions, payment delays and/or principal forgiveness. There were no FDMs during the three months ended September 30, 2023.

Prior to adoption of ASU 2022-02, the Company accounted for certain modifications as troubled debt restructurings (“TDRs”). Approximately 1.77% of our nonaccrual loans were considered TDRs at June 30, 2023. Borrowers that made timely payments after TDRs were considered non-performing for at least six months. Generally, after six months of timely payments, those TDRs were reclassified from the nonaccrual loan category to the performing loan category and any previously deferred interest income was recognized. The Company had no TDRs classified as performing loans at June 30, 2023.

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6.    STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

The Company has an equity incentive plan, the Amended and Restated 2014 Stock Incentive Plan (the “2014 Plan”), which provides for the granting of non-qualified and incentive stock options, restricted stock and restricted stock units, stock appreciation rights and other awards to employees, directors and consultants. The 2014 Plan is designed to encourage selected employees and directors to improve operations and increase profits, and to accept or continue employment or association with the Company through participation in the growth in the value of the Company’s common stock. The Company also has an employment agreement with its Chief Executive Officer that authorizes an award of restricted stock units (the “RSU award”). For additional information regarding the Company’s stock-based compensation plans, see Note 16—“Stock-based Compensation” in the 2023 Form 10-K.

At September 30, 2023, 915,865 shares of common stock remained available for issuance pursuant to grant awards under the 2014 Plan and unrecognized compensation expense related to non-vested awards aggregated to $53.1 million and is expected to be recognized in future periods as follows:

(Dollars in thousands)	Stock Award Compensation Expense
For the fiscal year remainder:
Remainder of fiscal year 2024	$	21,320
2025	19,416
2026	10,256
2027	1,879
2028	237
Total	$	53,108

The following table presents the status and changes in RSUs for the periods indicated:

	RSUs	Weighted-Average Grant-Date Fair Value
Non-vested balance at June 30, 2023	1,407,882	$	41.53
Granted	631,577	42.60
Vested	(360,817)	37.62
Forfeited	(12,781)	39.57
Non-vested balance at September 30, 2023	1,665,861	$	42.80

    The total fair value of shares vested for the three months ended September 30, 2023 was $14.8 million. The total fair value of shares vested for the three months ended September 30, 2022 was $12.0 million. The weighted-average remaining time period until vesting for restricted stock units as of September 30, 2023 was 1.5 years.

Common Stock Repurchases. During the three months ended September 30, 2023, the Company repurchased a total of $24.5 million, or 648,208 common shares at an average price of $37.85 per share. $6.0 million of such repurchases, or 159,297 common shares, were traded prior to September 30, 2023 but settled in October 2023. The Company repurchased an additional 963,640 shares for approximately $35 million from October 1, 2023 through October 20, 2023. The Company did not repurchase common stock during the three months ended September 30, 2022. For additional information regarding the Company’s share repurchase program see Note 15—“Stockholders’ Equity” in the 2023 Form 10-K.

20

7.    EARNINGS PER COMMON SHARE

The following table presents the calculation of basic and diluted earnings per common share (“EPS”):

	Three Months Ended
	September 30,
(Dollars in thousands, except per share data)	2023		2022
Earnings Per Common Share
Net income	$	82,645	$	58,407
Average common shares issued and outstanding	58,949,038		59,854,584
Earnings per common share	$	1.40	$	0.98
Diluted Earnings Per Common Share
Net income	$	82,645	$	58,407
Average common shares issued and outstanding	58,949,038		59,854,584
Dilutive effect of average unvested RSUs	859,284		631,810
Average dilutive common shares outstanding	59,808,322		60,486,394
Diluted earnings per common share	$	1.38	$	0.97

For further information regarding the Company’s EPS calculation see Note 17— “Earnings per Common Share” in the 2023 Form 10-K. For the three months ended September 30, 2023 and 2022, the number of weighted average antidilutive common stock equivalents that were not included in the computation of diluted EPS, because they would have been antidilutive, was 5,348 and 251,841 respectively.

8.    COMMITMENTS AND CONTINGENCIES

Operating Leases. The Company leases office space under operating lease agreements scheduled to expire at various dates. The following table represents maturities of lease liabilities as of September 30, 2023:

(Dollars in thousands)	As of September 30, 2023
Within one year	$	11,635
After one year and within two years	11,833
After two years and within three years	11,409
After three years and within four years	11,504
After four years within five years	9,869
After five years	17,841
Total lease payments	74,091
Less: amount representing interest	(6,847)
Total lease liability	$	67,244

Credit-Related Financial Instruments. The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the unaudited condensed consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

At September 30, 2023, the Company had unfunded commitments to originate $99.0 million million in fixed rate loans and $3,119.3 million million in variable rate loans, totaling an aggregate outstanding principal balance of $3,218.3 million million. For September 30, 2023, the Company’s fixed rate commitments to originate had a weighted-average rate of 8.44%. At September 30, 2023, the Company also had fixed rate commitments to sell loans with an aggregate outstanding principal balance of $13.2 million. At September 30, 2023, 36.0% of the commitments to originate loans are matched with commitments to sell related to conforming single family loans classified as held for sale, respectively.

Commitments to extend credit are agreements to lend to a customer so long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

21

In the normal course of business, Axos Clearing LLC.’s (“Axos Clearing”) customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose Axos Clearing to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and Axos Clearing has to purchase or sell the financial instrument underlying the contract at a loss. Axos Clearing’s clearing agreements with broker-dealers for which it provides clearing services requires them to indemnify Axos Clearing if customers fail to satisfy their contractual obligation.

Litigation. A consolidated derivative action, In re BofI Holding, Inc., Case No. 15cv2722 GPC (KSC), is pending before the United States District Court for the Southern District of California (the “Derivative Action”). The complaint in the Derivative Action sets forth allegations made in a related employment action, Erhart v. BofI Holding Inc., No. 15cv2287 BAS (NLS) (S.D. Cal.) (the “Employment Action”) brought by a former employee of the Company. The Derivative Action plaintiff seeks damages on behalf of the Company should an adverse judgment be entered in the Employment Action, and also seeks damages on behalf of the Company in connection with a now settled securities class action that was also based upon allegations made in the Employment Action and settled within available insurance coverage without attribution of wrongdoing to the Company, its management, or its directors. The Derivative Action has been stayed pending resolution of the Employment Action.

On October 26, 2022, a jury verdict was reached in the case of MUFG Union Bank, N.A. v. Axos Bank, et al, awarding damages to Union Bank. Judgment on such verdict was initially entered on June 5, 2023, and a corrected judgment was entered on June 20, 2023. The Company filed a Notice of Appeal on July 6, 2023, and the plaintiff filed a Notice of Cross-Appeal on July 20, 2023. The Company recorded a $16 million accrued expense in “Accounts payable and other liabilities” on the condensed consolidated balance sheet and in “General and administrative expense” on the condensed consolidated statement of income as of and for the year ended June 30, 2023, respectively. Given the uncertainty of the appellate process and other factors that are unknown or currently unquantifiable, the Company maintained its accrual at September 30, 2023.

In view of the inherent difficulty of predicting the outcome of each legal action it is not possible to reasonably predict or estimate the eventual loss or range of loss, if any, related to each legal action.

22

9.    SEGMENT REPORTING AND REVENUE INFORMATION

Segment Reporting. The operating segments reported below are the segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance. The operating segments and segment results of the Company are determined based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments and by which segment results are evaluated by the Chief Executive Officer in deciding how to allocate resources and in assessing performance.

The Company evaluates performance and allocates resources based on pre-tax profit or loss from operations. Certain corporate administration costs have not been allocated to the reportable segments. The Company operates through two operating segments: Banking Business and Securities Business. Inter-segment transactions are eliminated in consolidation and primarily include non-interest income earned by the Securities Business segment and non-interest expense incurred by the Banking Business segment for cash sorting fees related to deposits sourced from Securities Business segment customers, as well as interest expense paid by the Banking Business segment to each of the wholly-owned subsidiaries of the Company and to the Company itself for their operating cash held on deposit with the Business Banking segment. For more information on the Company’s operating segments, see Note 23—“Segment Reporting” in the Company’s 2023 Form 10-K.

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, goodwill, and assets of the segments:

	For the Three Months Ended September 30, 2023
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	209,219	$	5,542	$	(3,606)	$	211,155
Provision for credit losses	7,000		—		—		7,000
Non-interest income	12,557		34,555		(12,605)		34,507
Non-interest expense	100,786		27,523		(7,803)		120,506
Income before taxes	$	113,990	$	12,574	$	(8,408)	$	118,156
	For the Three Months Ended September 30, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	179,730	$	4,275	$	(3,530)	$	180,475
Provision for credit losses	8,750		—		—		8,750
Non-interest income	10,712		29,165		(12,669)		27,208
Non-interest expense	100,796		24,515		(9,224)		116,087
Income before taxes	$	80,896	$	8,925	$	(6,975)	$	82,846
	As of September 30, 2023
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Goodwill	$	35,721	$	61,952	$	—	$	97,673
Total Assets	$	19,929,316	$	858,141	$	37,749	$	20,825,206
	As of June 30, 2023
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Goodwill	$	35,721	$	61,952	$	—	$	97,673
Total Assets	$	19,396,167	$	899,496	$	52,806	$	20,348,469

23

Revenue Information. The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Accounting Standards Codification (“ASC”) 606 for the periods indicated. For further information of the Company’s recognition of revenue and ASC 606 see Note 1—“Organizations and Summary of Significant Accounting Policies” in the 2023 Form 10-K.

	For the Three Months Ended
	September 30,
(Dollars in thousands)	2023		2022
Advisory fee income	$	8,219	$	6,959
Broker-dealer clearing fees	5,535		5,233
Deposit service fees	680		1,106
Card fees	682		789
Bankruptcy trustee and fiduciary service fees	1,394		773
Non-interest income (in-scope ASC 606)	16,510		14,860
Non-interest income (out-of-scope ASC 606)	17,997		12,348
Total non-interest income	$	34,507	$	27,208

24

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the results of operations, financial condition, liquidity, off balance sheet items and capital resources of Axos Financial, Inc. and subsidiaries (collectively, “we”, “us” or the “Company”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of our operations. This discussion and analysis should be read in conjunction with our financial information in our 2023 Form 10-K, and the interim unaudited condensed consolidated financial statements and notes thereto contained in this report.

Some matters discussed in this report may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, may involve risks and uncertainties. These forward-looking statements can be identified by the use of terminology such as “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” “will,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These forward-looking statements relate to, among other things, the Company’s financial prospects and other projections of our performance and asset quality, our deposit balances and capital ratios, our ability to continue to grow profitably and increase our business, our ability to continue to diversify lending and deposit franchises, the anticipated timing and financial performance of other offerings, initiatives, and acquisitions, expectations of the environment in which we operate and projections of future performance. 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 our ability to successfully integrate acquisitions and realize the anticipated benefits of the transactions, changes in the interest rate environment, monetary policy, inflation, government regulation, general economic conditions, changes in the competitive marketplace, conditions in the real estate markets in which we operate, risks associated with credit quality, our ability to attract and retain deposits and access other sources of liquidity, and the outcome and effects of litigation and other factors beyond our reasonable control. These and other risks and uncertainties are discussed under the heading “Item 1A. Risk Factors” herein and in our 2023 Form 10-K, which has been filed with the SEC, could case actual results to differ materially from those expressed or implied in any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. All forward-looking statements are qualified in their entirety by this cautionary statement, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All written and oral forward-looking statements made in connection with this report, which are attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing information.

General

Our Company is a diversified financial services company with approximately $20.8 billion in assets and approximately $33.9 billion of assets under custody and/or administration at Axos Clearing. Axos Bank (the “Bank”) provides consumer and business banking products through its digital online and mobile banking platforms, low-cost distribution channels and affinity partners. Our Bank has deposit and loan customers nationwide including consumer and business checking, savings and time deposit accounts and financing for single family and multifamily residential properties, commercial real estate mortgages and loans, fund and lender finance loans, asset-based loans, auto loans and other consumer loans. Our Bank generates fee income from consumer and business products including fees from loans originated for sale, deposit account service fees as well as technology and payment transaction processing fees. We offer securities products and services to independent registered investment advisors (“RIAs”) and introducing broker dealers (“IBDs”) through Axos Clearing and Axos Advisor Services (“AAS”) and direct-to-consumer securities trading and digital investment management products through Axos Invest, Inc. (“Axos Invest”). AAS and Axos Clearing generate interest and fee income by providing comprehensive securities custody services to RIAs and clearing, stock lending and margin lending services to IBDs, respectively. Axos Invest generates fee income from self-directed securities trading and margin lending and fee income from digital wealth management services to consumers. Axos Invest LLC is an introducing broker-dealer which supports direct trading. Our common stock is listed on the New York Stock Exchange under the ticker symbol “AX” and is a component of the Russell 2000® Index, the KBW Nasdaq Financial Technology Index, the S&P SmallCap 600® Index, the KBW Nasdaq Financial Technology Index, and the Travillian Tech-Forward Bank Index.

Axos Financial, Inc. is supervised and regulated as a savings and loan holding company by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and is required to file reports with, comply with the rules and regulations of, and is subject to examination by, the Federal Reserve.

Our Bank is a federal savings bank wholly-owned by our Company and regulated by the Office of the Comptroller of the Currency (“OCC”), and the Federal Deposit Insurance Corporation (“FDIC”) as its deposit insurer. The Bank must file reports with the OCC and the FDIC concerning its activities and financial condition. As a depository institution with more than $10 billion in assets, our Bank and our affiliates are subject to direct supervision by the Consumer Financial Protection Bureau.

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Axos Clearing is a broker-dealer registered with the SEC and the Financial Industry Regulatory Authority, Inc. (“FINRA”). Axos Invest is a Registered Investment Advisor under the Investment Advisers Act of 1940, that is registered with the SEC. Axos Invest LLC is an introducing broker-dealer that is registered with the SEC and FINRA.

Segment Information

The Company determines reportable segments based on what separate financial information is available and what segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance. We operate through two segments: the Banking Business segment and the Securities Business segment.

Banking Business. The Banking Business segment includes a broad range of banking services including online banking, concierge banking, and mortgage, vehicle and unsecured lending through online, low-cost distribution channels to serve the needs of consumers and small businesses nationally. In addition, the Banking Business focuses on providing deposit products nationwide to industry verticals (e.g., Title and Escrow), treasury management products to a variety of businesses, and commercial & industrial and commercial real estate lending to clients. The Banking Business includes a bankruptcy trustee and fiduciary service that provides specialized software and consulting services to Chapter 7 bankruptcy and non-Chapter 7 trustees and fiduciaries.

Securities Business. The Securities Business segment includes the clearing broker-dealer, registered investment advisor custody business, and introducing broker-dealer lines of businesses. These lines of business offer products independently to their own customers as well as to Banking Business segment clients. The Securities Business also offers specialized accounting software that serves the business management, family office and wealth management industries.

Critical Accounting Estimates

The following discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements and the notes thereto, which have been prepared in accordance with GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the unaudited condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions based upon historical experience and various factors and circumstances. We believe our estimates and assumptions are reasonable under the circumstances. However, actual results may differ significantly from these estimates and assumptions and could have a material effect on the carrying value of assets and liabilities, our results of operations and/or our cash flows.

Critical accounting estimates are those we consider most important to the portrayal of our financial condition and results of operations because they require our most difficult judgments, often as a result of the need to make estimates that are inherently uncertain. Our critical accounting estimates are described in detail in the 2023 Form 10-K in Note 1—“Organizations and Summary of Significant Accounting Policies” and Item 7—“Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Critical Accounting Policies and Estimates.”

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USE OF NON-GAAP FINANCIAL MEASURES

In addition to the results presented in accordance with GAAP, this report includes the non-GAAP financial measures adjusted earnings, adjusted earnings per common share (“Adjusted EPS”), 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. As noted below with respect to each measure, we believe the non-GAAP financial measures disclosed in this report enhance investors’ understanding of our business and performance, and our management uses these non-GAAP measures when it internally evaluates the performance of our business and makes operating decisions. However, 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 (including amortization of intangible assets related to acquisitions) and other costs (unusual or non-recurring charges). 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 Company’s operating performance. We believe excluding the non-recurring acquisition-related costs, and other costs provides investors with an alternative understanding of our 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:

	Three Months Ended
	September 30,
(Dollars in thousands, except per share amounts)	2023		2022
Net income	$	82,645	$	58,407
Acquisition-related costs	2,790		2,734
Other costs1	—		16,000
Income tax effect	(839)		(5,526)
Adjusted earnings (Non-GAAP)	$	84,596	$	71,615
Average dilutive common shares outstanding	$	59,808,322	$	60,486,394
Diluted EPS	$	1.38	$	0.97
Acquisition-related costs	0.05		0.04
Other costs	—		0.26
Income tax effect	(0.02)		(0.09)
Adjusted EPS (Non-GAAP)	$	1.41	$	1.18
1 Other costs for the three months ended September 30, 2022 reflect an accrual as a result of an adverse legal judgement that has not been finalized.

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 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, the nearest compatible GAAP measure, to tangible book value (Non-GAAP) as of the dates indicated:

	September 30,
(Dollars in thousands, except per share amounts)	2023		2022
Common stockholders’ equity	$	1,976,208	$	1,700,972
Less: servicing rights, carried at fair value	29,338		26,373
Less: goodwill and intangible assets	149,572		160,429
Tangible common stockholders’ equity (Non-GAAP)	$	1,797,298	$	1,514,170
Common shares outstanding at end of period	58,503,976		59,998,673
Book value per common share	33.78		28.35
Less: servicing rights, carried at fair value per common share	0.50		0.44
Less: goodwill and other intangible assets per common share	2.56		2.67
Tangible book value per common share (Non-GAAP)	$	30.72	$	25.24

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SELECTED FINANCIAL INFORMATION

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

AXOS FINANCIAL, INC.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(Dollars in thousands)	September 30, 2023			June 30, 2023			September 30, 2022
Selected Balance Sheet Data:
Total assets	$	20,825,206		$	20,348,469		$	18,407,078
Loans—net of allowance for credit losses	16,955,041			16,456,728			15,211,573
Loans held for sale, carried at fair value	8,014			23,203			9,463
Loans held for sale, lower of cost or fair value	—			776			10,476
Allowance for credit losses	170,870			166,680			155,472
Securities—trading	640			758			75
Securities—available-for-sale	236,726			232,350			257,634
Securities borrowed	96,424			134,339			87,622
Customer, broker-dealer and clearing receivables	285,423			374,074			410,842
Total deposits	17,565,741			17,123,108			15,176,631
Advances from the FHLB	90,000			90,000			112,500
Borrowings, subordinated debentures and other borrowings	447,733			361,779			425,818
Securities loaned	116,446			159,832			206,889
Customer, broker-dealer and clearing payables	341,915			445,477			500,584
Total stockholders’ equity	1,976,208			1,917,159			1,700,972
Capital Ratios:
Equity to assets at end of period	9.49		%	9.42		%	9.24		%
Axos Financial, Inc.:
Tier 1 leverage (to adjusted average assets)	9.27		%	8.96		%	8.98		%
Common equity tier 1 capital (to risk-weighted assets)	11.11		%	10.94		%	9.97		%
Tier 1 capital (to risk-weighted assets)	11.11		%	10.94		%	9.97		%
Total capital (to risk-weighted assets)	14.06		%	13.82		%	12.90		%
Axos Bank:
Tier 1 leverage (to adjusted average assets)	9.99		%	9.68		%	10.30		%
Common equity tier 1 capital (to risk-weighted assets)	11.69		%	11.63		%	10.87		%
Tier 1 capital (to risk-weighted assets)	11.69		%	11.63		%	10.87		%
Total capital (to risk-weighted assets)	12.65		%	12.50		%	11.71		%
Axos Clearing LLC:
Net capital	$	101,391		$	35,221		$	49,183
Excess capital	$	96,211		$	29,905		$	42,324
Net capital as a percentage of aggregate debit items	39.14		%	13.25		%	14.34		%
Net capital in excess of 5% aggregate debit items	$	88,440		$	21,930		$	32,035

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AXOS FINANCIAL, INC.

SELECTED CONSOLIDATED FINANCIAL INFORMATION

	At or for the Three Months Ended
	September 30,
(Dollars in thousands, except per share data)	2023			2022
Selected Income Statement Data:
Interest and dividend income	$	363,952		$	223,786
Interest expense	152,797			43,311
Net interest income	211,155			180,475
Provision for credit losses	7,000			8,750
Net interest income after provision for credit losses	204,155			171,725
Non-interest income	34,507			27,208
Non-interest expense	120,506			116,087
Income before income tax expense	118,156			82,846
Income tax expense	35,511			24,439
Net income	$	82,645		$	58,407
Per Common Share Data:
Net income:
Basic	$	1.40		$	0.98
Diluted	$	1.38		$	0.97
Adjusted earnings per common share (Non-GAAP)1	$	1.41		$	1.18
Book value per common share	$	33.78		$	28.35
Tangible book value per common share (Non-GAAP)1	$	30.72		$	25.24
Weighted average number of common shares outstanding:
Basic	58,949,038			59,854,584
Diluted	59,808,322			60,486,394
Common shares outstanding at end of period	58,503,976			59,998,673
Common shares issued at end of period	69,826,263			69,151,152
Performance Ratios and Other Data:
Loan originations for investment	$	2,605,332		$	2,486,224
Loan originations for sale	52,858			70,073
Return on average assets	1.64		%	1.32		%
Return on average common stockholders’ equity	16.91		%	13.91		%
Interest rate spread2	3.37		%	3.66		%
Net interest margin3	4.36		%	4.26		%
Net interest margin3 – Banking Business Segment	4.46		%	4.50		%
Efficiency ratio4	49.05		%	55.90		%
Efficiency ratio4 – Banking Business Segment	45.44		%	52.93		%
Asset Quality Ratios:
Net annualized charge-offs to average loans	0.04		%	0.05		%
Non-performing loans and leases to total loans	0.62		%	0.78		%
Non-performing assets to total assets	0.56		%	0.68		%
Allowance for credit losses - loans to total loans held for investment	1.00		%	1.01		%
Allowance for credit losses - loans to non-performing loans	159.80		%	129.04		%

1 See “Use of Non-GAAP Financial Measures.”

2 Interest rate spread represents the difference between the annualized weighted average yield on interest-earning assets and the annualized weighted average rate paid on interest-bearing liabilities.

3 Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

4 Efficiency ratio represents non-interest expense as a percentage of the aggregate of net interest income and non-interest income.

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RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2023 and 2022

For the three months ended September 30, 2023, we had net income of $82.6 million, or $1.38 per diluted share, compared to net income of $58.4 million, or $0.97 per diluted share, for the three months ended September 30, 2022.

Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table presents information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin:

	For the Three Months Ended
	September 30,
	2023						2022
(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:
Loans3, 4	$	16,651,933	$	326,974	7.85	%	$	14,761,077	$	208,338	5.65	%
Interest-earning deposits in other financial institutions	2,093,366		28,510		5.45	%	1,235,712		7,347		2.38	%
Mortgage-backed and other investment securities4	233,148		3,137		5.38	%	257,119		3,298		5.13	%
Securities borrowed and margin lending5	364,938		4,995		5.47	%	669,150		4,384		2.62	%
Stock of the regulatory agencies	17,250		336		7.81	%	28,281		419		5.93	%
Total interest-earning assets	19,360,635		363,952		7.52	%	16,951,339		223,786		5.28	%
Non-interest-earning assets	736,962						689,230
Total assets	$	20,097,597					$	17,640,569
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	12,847,997	$	134,359	4.18	%	$	7,715,655	$	27,709	1.44	%
Time deposits	1,173,682		11,751		4.01	%	1,156,717		4,796		1.66	%
Securities loaned	188,705		449		0.95	%	534,538		943		0.71	%
Advances from the FHLB	90,000		529		2.35	%	880,348		5,163		2.35	%
Borrowings, subordinated notes and debentures	419,925		5,709		5.44	%	385,148		4,700		4.88	%
Total interest-bearing liabilities	14,720,309		152,797		4.15	%	10,672,406		43,311		1.62	%
Non-interest-bearing demand deposits	2,749,567						4,517,918
Other non-interest-bearing liabilities	673,359						770,189
Stockholders’ equity	1,954,362						1,680,056
Total liabilities and stockholders’ equity	$	20,097,597					$	17,640,569
Net interest income			$	211,155					$	180,475
Interest rate spread6					3.37	%					3.66	%
Net interest margin7					4.36	%					4.26	%

1Average balances are obtained from daily data.

2Annualized.

3Loans include loans held for sale, loan premiums and unearned fees.

4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees.

5Margin lending is the significant component of the asset titled customer, broker-dealer and clearing receivables on the unaudited condensed consolidated balance sheets.

6Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.

7Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table sets forth the effects of changing rates and volumes on our net interest income. Information is provided with respect to (i) effects on interest income and interest expense attributable to changes in volume (changes in volume multiplied by prior rate); and (ii) effects on interest income and interest expense attributable to changes in rate (changes in rate multiplied by prior volume). The change in interest due to both volume and rate has been allocated proportionally to each based on the relative changes attributable to volume and changes attributable to rate.

	For the Three Months Ended
	September 30,
	2023 vs 2022
	Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)
Increase (decrease) in interest income:
Loans	$	29,367	$	89,269	$	118,636
Interest-earning deposits in other financial institutions	7,403		13,760		21,163
Mortgage-backed and other investment securities	(317)		156		(161)
Securities borrowed and margin lending	(2,631)		3,242		611
Stock of the regulatory agencies	(193)		110		(83)
Total increase (decrease) in interest income	$	33,629	$	106,537	$	140,166
Increase (decrease) in interest expense:
Interest-bearing demand and savings	$	27,625	$	79,025	$	106,650
Time deposits	71		6,884		6,955
Securities loaned	(746)		252		(494)
Advances from the FHLB	(4,634)		—		(4,634)
Borrowings, subordinated notes and debentures	444		565		1,009
Total increase (decrease) in interest expense	$	22,760	$	86,726	$	109,486

Net Interest Income

For the three months ended September 30, 2023, net interest income totaled $211.2 million, an increase of 17.0% compared to net interest income of $180.5 million for the three months ended September 30, 2022. Net interest margin, defined as annualized net interest income divided by average interest-earning assets, increased by 10 basis points to 4.36% for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

For the three months ended September 30, 2023, total interest and dividend income increased 62.6%, primarily due to a $118.6 million increase in interest income from loans, attributable to a 220 basis point increase in rates earned and a $1.9 billion increase in average balances, and a $21.2 million increase in interest income from deposits placed with other financial institutions, attributable to a $0.9 billion increase in average balances and 307 basis point increase in rates earned.

For the three months ended September 30, 2023, total interest expense increased 252.8%, primarily due to a $106.7 million interest expense increase from demand and savings deposits, attributable to a 274 basis point and $5.1 billion increase in average balances.

Provision for Credit Losses

The provision for credit losses was $7.0 million for the three months ended September 30, 2023 compared to $8.8 million for the three months ended September 30, 2022. The provision for credit losses for loans of $5.8 million for the three months ended September 30, 2023 was primarily due to net loan growth, mainly in the Commercial & Industrial - Non-RE portfolio, and a shift in weighting towards the more adverse forecast scenarios reflecting uncertainty in the economic environment and the provision for credit losses for unfunded commitments of $1.2 million for the three months ended September 30, 2023 was primarily driven by an increase in the amount of Commercial & Industrial - Non-RE unfunded commitments. Provisions for credit losses are charged to income to bring the allowance for credit losses for loans and unfunded lending commitments to a level deemed appropriate by management based on the factors discussed under the heading “Financial Condition—Asset Quality and Allowance for Credit Losses - Loans.”

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Non-Interest Income

The following table sets forth information regarding our non-interest income for the periods shown:

	For the Three Months Ended
	September 30,
(Dollars in thousands)	2023		2022		Inc (Dec)
Broker-dealer fee income	12,477		9,178		3,299
Advisory fee income	8,219		6,959		1,260
Banking and service fees	8,350		6,514		1,836
Mortgage banking and servicing rights income	3,878		3,365		513
Prepayment penalty fee income	1,583		1,192		391
Total non-interest income	$	34,507	$	27,208	$	7,299

For the three months ended September 30, 2023, non-interest income increased by $7.3 million, or 27%, primarily due to an increase of $3.3 million in broker-dealer fee income which was driven by higher rates earned on cash sorting balances at non-affiliated banks, an increase of $1.8 million in banking and service fees from higher unused commercial line of credit fees, incremental technology revenues and a $1.3 million increase in advisory fee income attributable to higher mutual fund fee income and higher average assets under custody. Mortgage banking and servicing rights income increased by $0.5 million to $3.9 million for the three months ended September 30, 2023, primarily due to a $1.9 million servicing right adjustment for the marine loans, partially offset by lower mortgage sales activity.

Non-Interest Expense

The following table sets forth information regarding our non-interest expense for the periods shown:

	For the Three Months Ended
	September 30,
(Dollars in thousands)	2023		2022		Inc (Dec)
Salaries and related costs	$	55,811	$	46,996	$	8,815
Data and operational processing	16,084		14,022		2,062
Depreciation and amortization	5,878		6,094		(216)
Advertising and promotional	10,375		6,370		4,005
Professional services	9,811		8,087		1,724
Occupancy and equipment	3,846		4,054		(208)
FDIC and regulator fees	4,449		3,735		714
Broker-dealer clearing charges	4,012		2,829		1,183
General and administrative	10,240		23,900		(13,660)
Total non-interest expenses	$	120,506	$	116,087	$	4,419

For the three months ended September 30, 2023, non-interest expense increased $4.4 million, or 3.8%, primarily due to increases of:

•$8.8 million in salaries and related costs primarily due to increased headcount and salaries;

•$4.0 million in advertising and promotional expense primarily due to deposit marketing;

•$2.1 million in data and operational processing expense primarily due to enhancements of core processing systems, customer interfaces and clearing and custody technology programs; and

•$1.7 million in professional services primarily due to higher consulting expenses.

These increases were partially offset by a $13.7 million decrease in general and administrative expenses, primarily reflecting the absence of a $16.0 million accrual in the prior year quarter for an adverse legal judgment that has not been finalized.

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Provision for Income Taxes

Income tax expense was $35.5 million for the three months ended September 30, 2023, compared to $24.4 million for three months ended September 30, 2022. Our effective income tax rates for the three months ended September 30, 2023 and 2022 were 30.05% and 29.50%, respectively.

SEGMENT RESULTS

Our Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to our Company’s financial condition and operating results and management’s regular review of the operating results of those services. Our Company operates through two operating segments: Banking Business and Securities Business. In order to reconcile the two segments to the consolidated totals, our Company includes parent-only activities and intercompany eliminations. Inter-segment transactions are eliminated in consolidation and primarily include non-interest income earned by the Securities Business segment and non-interest expense incurred by the Banking Business segment for cash sorting fees related to deposits sourced from Securities Business segment customers, as well as interest expense paid by the Banking Business segment to each of the wholly-owned subsidiaries of our Company and to our Company itself for their operating cash held on deposit with the Banking Business segment. The following tables present the operating results of the segments:

	For the Three Months Ended September 30, 2023
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	209,219	$	5,542	$	(3,606)	$	211,155
Provision for credit losses	7,000		—		—		7,000
Non-interest income	12,557		34,555		(12,605)		34,507
Non-interest expense	100,786		27,523		(7,803)		120,506
Income before taxes	$	113,990	$	12,574	$	(8,408)	$	118,156
	For the Three Months Ended September 30, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	179,730	$	4,275	$	(3,530)	$	180,475
Provision for credit losses	8,750		—		—		8,750
Non-interest income	10,712		29,165		(12,669)		27,208
Non-interest expense	100,796		24,515		(9,224)		116,087
Income before taxes	$	80,896	$	8,925	$	(6,975)	$	82,846

Banking Business

For the three months ended September 30, 2023, our Banking Business segment had income before taxes of $114.0 million, compared to income before taxes of $80.9 million for the three months ended September 30, 2022.

For the three months ended September 30, 2023 , the Banking Business segment’s net interest income increased $29.5 million, or 16.4%, compared to net interest income for the three months ended September 30, 2022. The increase in net interest income was primarily due to an increase in interest income from loans and from deposits in other financial institutions, primarily attributable to higher rates earned and average balances, partially offset by higher rates paid and higher average interest-bearing deposit balances.

For the three months ended September 30, 2023, the Banking Business segment’s non-interest income increased $1.8 million, or 17.2%, compared to non-interest income for the three months ended September 30, 2022. The increase in non-interest income was primarily due to an increase in banking and service fees from higher unused commercial line of credit fees.

For the three months ended September 30, 2023, the Banking Business segment’s non-interest expense remained consistent compared to non-interest expense for the three months ended September 30, 2023. Increases in salaries and related costs driven by increased headcount, increases in advertising and promotional expense related to deposit marketing and increases in professional services from higher consulting expenses were offset by the absence of a $16.0 million accrual in the prior year quarter for an adverse legal judgment that has not been finalized.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table presents our Banking Business segment’s information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin for the three months ended September 30, 2023 and 2022:

	For the Three Months Ended
	September 30,
	2023						2022
(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:
Loans3, 4	$	16,630,634	$	326,656	7.86	%	$	14,735,034	$	208,010	5.65	%
Interest-earning deposits in other financial institutions	1,866,414		25,716		5.51	%	929,206		5,631		2.42	%
Mortgage-backed and other investment securities4	239,485		3,174		5.30	%	275,975		3,371		4.89	%
Stock of the regulatory agencies	17,250		336		7.81	%	28,281		418		5.91	%
Total interest-earning assets	18,753,783		355,882		7.59	%	15,968,496		217,430		5.45	%
Non-interest-earning assets	380,657						312,320
Total assets	$	19,134,440					$	16,280,816
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	12,925,819	$	134,383	4.16	%	$	7,809,552	$	27,741	1.42	%
Time deposits	1,173,682		11,751		4.01	%	1,156,717		4,796		1.66	%
Advances from the FHLB	90,000		529		2.35	%	880,348		5,163		2.35	%
Borrowings, subordinated notes and debentures	33		—		—	%	22		—		—	%
Total interest-bearing liabilities	14,189,534		146,663		4.13	%	9,846,639		37,700		1.53	%
Non-interest-bearing demand deposits	2,819,139						4,583,593
Other non-interest-bearing liabilities	207,794						190,997
Stockholders’ equity	1,917,973						1,659,587
Total liabilities and stockholders’ equity	$	19,134,440					$	16,280,816
Net interest income			$	209,219					$	179,730
Interest rate spread5					3.46	%					3.92	%
Net interest margin6					4.46	%					4.50	%

1Average balances are obtained from daily data.

2Annualized.

3Loans include loans held for sale, loan premiums and unearned fees.

4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees.

5Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.

6Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table sets forth the effects of changing rates and volumes on our Banking Business segment’s net interest income. Information is provided with respect to (i) effects on interest income and interest expense attributable to changes in volume (changes in volume multiplied by prior rate); and (ii) effects on interest income and interest expense attributable to changes in rate (changes in rate multiplied by prior volume). The change in interest due to both volume and rate has been allocated proportionally to each based on the relative changes attributable to volume and changes attributable to rate.

	For the Three Months Ended
	September 30,
	2023 vs 2022
	Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)
Increase / (decrease) in interest income:
Loans	$	29,364	$	89,282	$	118,646
Interest-earning deposits	8,864		11,221		20,085
Securities	(467)		270		(197)
Stock of the regulatory agencies, at cost	(192)		110		(82)
Total increase (decrease) in interest income	$	37,569	$	100,883	$	138,452
Increase / (decrease) in interest expense:
Interest-bearing demand and savings	$	27,031	$	79,611	$	106,642
Time deposits	71		6,884		6,955
Advances from the FHLB	(4,634)		—		(4,634)
Total increase (decrease) in interest expense	$	22,468	$	86,495	$	108,963

We consider the ratios shown in the table below to be key indicators of the performance of our Banking Business segment:

	For the Three Months Ended September 30,
	2023		2022
Efficiency ratio	45.44	%	52.93	%
Return on average assets	1.65	%	1.66	%
Interest rate spread	3.46	%	3.92	%
Net interest margin	4.46	%	4.50	%

Our Banking Business segment’s net interest margin exceeds our consolidated net interest margin. Our consolidated net interest margin includes certain items that are not reflected in the calculation of our net interest margin within our Banking Business and reduce our consolidated net interest margin, such as the borrowing costs at our Company and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities in our Securities Business, including items related to securities financing operations.

Securities Business

For the three months ended September 30, 2023, our Securities Business segment had income before taxes of $12.6 million, compared to income before taxes of $8.9 million for the three months ended September 30, 2022.

For the three months ended September 30, 2023, net interest income increased $1.3 million, or 30%, compared to net interest income for the three months ended September 30, 2022. The increase was primarily driven by an increase in rates earned on interest bearing cash deposit balances and margin lending, partially offset by higher average balances and rates on borrowings.

For the three months ended September 30, 2023, non-interest income increased $5.4 million, or 18%, compared to non-interest income for the three months ended September 30, 2022. The increase in non-interest income was primarily due to higher rates earned on cash sorting balances at non-affiliated banks, incremental technology revenues and an increase in advisory fee income attributable to higher mutual fund fee income and higher average assets under custody.

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For the three months ended September 30, 2023, non-interest expense increased $3.0 million, or 12%, compared to non-interest expense for the three months ended September 30, 2022. The increase was primarily related to an increase in salaries and related costs on higher headcount and salaries, as well as higher broker-dealer clearing charges.

The following table provides selected information for Axos Clearing as of each period indicated:

(Dollars in thousands)	September 30, 2023		June 30, 2023
FDIC insured deposit program balances at banks	$	1,563,867	$	1,627,053
Margin balances	$	221,790	$	205,880
Cash reserves for the benefit of customers	$	252,007	$	149,059
Securities lending:
Interest-earning assets – securities borrowed	$	96,424	$	134,339
Interest-bearing liabilities – securities loaned	$	116,446	$	159,832

FINANCIAL CONDITION

Balance Sheet Analysis

Our total assets increased $0.5 billion, or 2.3%, to $20.8 billion, as of September 30, 2023, up from $20.3 billion at June 30, 2023. The increase in total assets was primarily due to an increase of $0.5 billion in loans. Total liabilities increased $0.4 billion, primarily from an increase in deposits of $0.4 billion.

Loans

Net loans held for investment increased 3.0% to $17.0 billion at September 30, 2023, up from $16.5 billion at June 30, 2023. The increase in the loan portfolio was primarily due to loan originations of $2.6 billion, partially offset by loan repayments of $2.2 billion.

The following table sets forth the composition of the loan portfolio as of the dates indicated:

	September 30, 2023				June 30, 2023
(Dollars in thousands)	Amount		Percent		Amount		Percent
Single Family - Mortgage & Warehouse	$	4,313,906	25.1	%	$	4,173,833	25.1	%
Multifamily and Commercial Mortgage	2,961,981		17.3	%	3,082,225		18.5	%
Commercial Real Estate	6,168,626		35.9	%	6,199,818		37.2	%
Commercial & Industrial - Non-RE	3,208,969		18.7	%	2,639,650		15.8	%
Auto & Consumer	506,011		2.9	%	546,264		3.3	%
Other	2,438		0.1	%	10,236		0.1	%
Total gross loans	17,161,931		100.0	%	16,652,026		100.0	%
Allowance for credit losses - loans	(170,870)				(166,680)
Unaccreted discounts and loan fees	(36,020)				(28,618)
Total net loans	$	16,955,041			$	16,456,728

The Bank originates some single-family interest-only loans with terms that include repayments that are less than the repayments for fully amortizing loans. The Bank’s lending guidelines for interest only loans are adjusted for the increased credit risk associated with these loans by requiring borrowers with such loans to borrow at LTVs that are lower than standard amortizing ARM loans and by calculating debt to income ratios for qualifying borrowers based upon a fully amortizing payment, not the interest only payment. The Bank monitors and performs reviews of interest only loans as part of its loan portfolio management process. Adverse trends reflected in the Company’s delinquency statistics, grading and classification of interest only loans would be reported to management and the Board of Directors. As of September 30, 2023, the Company had $1.4 billion of interest-only mortgage loans with a weighted average LTV of 57.6%.

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Asset Quality and Allowance for Credit Losses - Loans

Non-performing Assets

Non-performing loans are comprised of those 90 days or more past due and other non-accrual loans. Non-performing assets include non-performing loans plus, other real estate owned and repossessed vehicles. At September 30, 2023, our non-performing loans totaled $106.9 million, or 0.62% of total gross loans and our total non-performing assets totaled $115.7 million, or 0.56%, of total assets.

Non-performing loans and foreclosed assets or “non-performing assets” consisted of the following as of the dates indicated:

(Dollars in thousands)	September 30, 2023			June 30, 2023			Inc (Dec)
Non-performing assets:
Non-accrual loans:
Single Family - Mortgage & Warehouse	$	36,582		$	30,714		$	5,868
Multifamily and Commercial Mortgage	38,827			35,103			3,724
Commercial Real Estate	26,102			14,852			11,250
Commercial & Industrial - Non-RE	2,989			2,989			—
Auto & Consumer	2,386			1,457			929
Other	40			2,045			(2,005)
Total non-performing loans	$	106,926		$	87,160		$	19,766
Foreclosed real estate	6,966			6,966			—
Repossessed—Autos	1,813			1,133			680
Total non-performing assets	$	115,705		$	95,259		$	20,446
Total non-performing loans as a percentage of total loans	0.62		%	0.52		%	0.10		%
Total non-performing assets as a percentage of total assets	0.56		%	0.47		%	0.09		%

Total non-performing assets increased from $95.3 million at June 30, 2023 to $115.7 million at September 30, 2023. The increase in non-performing assets was primarily attributable to increases in commercial real estate and single-family mortgage loans.

Management establishes an allowance for credit losses based upon its evaluation of the expected lifetime credit losses related to the amortized cost basis of loans on the balance sheet. The net charge-off rate for the three months ended September 30, 2023 was 0.04%, compared to 0.05% for the three months ended September 30, 2022. Of the 0.04% of net charge-offs for the three months ended September 30, 2023, 0.02% were related to Auto loans covered by insurance policies. For additional information regarding the Company’s allowance for credit losses see Note 5—“Loans and Allowance for Credit Losses” in the Condensed Consolidated Financial Statements. For a discussion of the provision for credit losses for the three months ended September 30, 2023, see “Results of Operations—Provision for Credit Losses.” We believe that the lower average LTV in the loan portfolio will continue to result in future lower average mortgage loan charge-offs when compared to many other comparable banks. The resolution of existing other real estate owned and non-performing loans should not have a significant adverse impact on our operating results.

Investment Securities

Total investment securities were $237.4 million as of September 30, 2023, compared with $233.1 million at June 30, 2023. During the three months ended September 30, 2023, we purchased $4.8 million investment securities and received principal repayments of approximately $0.7 million in our available-for-sale portfolio. The remainder of the change for the available-for-sale portfolio is attributable to unrealized losses and accretion.

Deposits

Deposits increased by $0.4 billion, or 2.6%, to $17.6 billion at September 30, 2023, from $17.1 billion at June 30, 2023. Interest bearing demand and savings decreased $0.7 billion and time deposits decreased $0.2 billion. Non-interest bearing deposits were relatively unchanged at $2.9 billion as of September 30, 2023, compared with June 30, 2023.

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The following table sets forth the composition of the deposit portfolio as of the dates indicated:

	September 30, 2023				June 30, 2023
(Dollars in thousands)	Amount		Rate1		Amount		Rate1
Non-interest bearing	$	2,875,432	—	%	$	2,898,150	—	%
Interest-bearing:
Demand	3,217,841		3.27	%	3,334,615		2.43	%
Savings	10,359,145		4.73	%	9,575,781		4.20	%
Total interest-bearing demand and savings	13,576,986		4.38	%	12,910,396		3.74	%
Time deposits:
$250 and under2	734,451		3.59	%	932,436		3.72	%
Greater than $250	378,872		4.59	%	382,126		4.36	%
Total time deposits	1,113,323		3.93	%	1,314,562		3.91	%
Total interest bearing2	14,690,309		4.35	%	14,224,958		3.76	%
Total deposits	$	17,565,741	3.64	%	$	17,123,108	3.12	%

1 Based on weighted-average stated interest rates at end of period.

2 The total interest-bearing includes brokered deposits of $1,852.6 million and $2,028.5 million as of September 30, 2023 and June 30, 2023, respectively, of which $516.7 million and $690.9 million, respectively, are time deposits classified as $250,000 and under.

The following table sets forth the number of accounts by type as of the date indicated:

	September 30, 2023	June 30, 2023	September 30, 2022
Non-interest bearing	46,647	45,640	43,539
Interest-bearing checking and savings accounts	447,288	427,299	351,988
Time deposits	5,976	6,340	8,134
Total number of accounts	499,911	479,279	403,661

Total deposits that exceeded the FDIC insurance limit of $250,000 or were not collateralized at both September 30, 2023 and June 30, 2023 were $1.7 billion. The maturities of certificates of deposit that exceeded the FDIC insurance limit of $250,000 at September 30, 2023 were as follows:

(Dollars in thousands)	September 30, 2023
3 months or less	$	185,300
3 months to 6 months	143,748
6 months to 12 months	19,523
Over 12 months	30,301
Total	$	378,872

Borrowings

The following table sets forth the composition of our borrowings and the interest rates at the dates indicated:

	September 30, 2023					June 30, 2023					September 30, 2022
(Dollars in thousands)	Balance			Weighted Average Rate		Balance			Weighted Average Rate		Balance			Weighted Average Rate
FHLB Advances	$	90,000		2.32	%	$	90,000		2.32	%	$	112,500		2.27	%
Borrowings, subordinated notes and debentures	447,733			5.27	%	361,779			4.69	%	425,818			4.13	%
Total borrowings	$	537,733		4.78	%	$	451,779		4.22	%	$	538,318		3.74	%
Weighted average cost of borrowings during the quarter	4.89		%			4.58		%			3.12		%
Borrowings as a percent of total assets	2.58		%			2.22		%			2.92		%

We regularly use advances from the FHLB to manage our interest rate risk and, to a lesser extent, manage our liquidity position. Generally, FHLB advances with terms between three and ten years have been used to fund the origination of loans and to provide us with interest rate risk protection should rates rise.

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Stockholders’ Equity

Stockholders’ equity increased $59.0 million to $1,976.2 million at September 30, 2023, compared to $1,917.2 million at June 30, 2023. The increase was primarily the result of net income for the three months ended September 30, 2023 of $82.6 million, partially offset by purchases of treasury stock of $24.5 million.

During the three months ended September 30, 2023, the Company repurchased 648,208 shares of common stock at an average price of $37.85 per share. The Company had $79.1 million remaining under the 2023 Board authorized stock repurchase program as of September 30, 2023. The Company repurchased an additional 963,640 shares for approximately $35 million from October 1, 2023 through October 20, 2023.

LIQUIDITY

Cash flow information is as follows:

	For the Three Months Ended
	September 30,
(Dollars in thousands)	2023		2022
Operating Activities	$	33,870	$	70,821
Investing Activities	$	(505,965)	$	(1,150,290)
Financing Activities	$	503,778	$	1,202,818

During the three months ended September 30, 2023, we had net cash inflows from operating activities of $33.9 million compared to inflows of $70.8 million for the three months ended September 30, 2022. Net operating cash inflows and outflows fluctuate primarily due to the timing of the following: originations of loans held for sale, proceeds from loan sales, securities borrowed and loaned, and customer, broker-dealer and clearing receivables and payables and changes in other assets and payables.

Net cash outflows from investing activities totaled $506.0 million for the three months ended September 30, 2023, while outflows totaled $1,150.3 million for the three months ended September 30, 2022. The decrease in outflows was primarily due to higher principal repayments, partially offset by increased originations and purchases of loans held for investment related to the acquisition of marine floor financing loans in the three months ended September 30, 2023.

Net cash inflows from financing activities totaled $503.8 million for the three months ended September 30, 2023, compared to net cash inflows from financing activities of $1,202.8 million for the three months ended September 30, 2022. The primary driver behind the decrease in net cash inflows was a lower net increase in deposits in the three months ended September 30, 2023.

As of September 30, 2023, the Bank could borrow up to 35% of its total assets from the FHLB. Borrowings are collateralized by the pledge of certain mortgage loans and investment securities to the FHLB. At September 30, 2023, the Company had $2,894.4 million available immediately and $3,894.3 million available with additional collateral and the Company had $5,172.6 million of loans and $162 thousand of securities pledged to the FHLB. We also had five unsecured federal funds purchase lines with five different banks totaling $250 million, under which no borrowings were outstanding at September 30, 2023.

The Bank has the ability to borrow short-term from the Federal Reserve Bank of San Francisco Discount Window. At September 30, 2023, the Bank did not have any borrowings outstanding and the amount available from this source was $2,862.4 million. The credit line is collateralized by consumer loans and mortgage-backed securities. At September 30, 2023 we had $3,642.6 million of loans pledged to the Federal Reserve Bank of San Francisco.

Axos Clearing has a total of $150 million in secured lines of credit for borrowing, as needed. As of September 30, 2023, there was $69.5 million outstanding on this credit facility. This credit facility bears interest at rates based on the Federal Funds rate and is due upon demand.

Axos Clearing also has $190 million of unsecured lines of credit available for limited purpose borrowing, which includes $100 million from Axos Financial, Inc. As of September 30, 2023, there was $43.4 million outstanding on this credit facility after elimination of intercompany balances. This credit facility bears interest at rates based on the Federal Funds rate and is due upon demand.

We view our liquidity sources to be stable and adequate for our anticipated needs and contingencies for both the short- and long-term. Due to the diversified sources of our deposits, while maintaining approximately 90% of our total Bank deposits

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in insured or collateralized accounts as of September 30, 2023, we believe we have the ability to increase our level of deposits, and have available other potential sources of funding, to address our liquidity needs for the foreseeable future.

OFF-BALANCE SHEET COMMITMENTS

At September 30, 2023, we had unfunded commitments to originate loans with an aggregate outstanding principal balance of $3,218.3 million, and commitments to sell loans with an aggregate outstanding principal balance of $13.2 million. We have no commitments to purchase investment securities as of September 30, 2023.

In the normal course of business, Axos Clearing’s customer, broker-dealer, and registered investment advisor activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose Axos Clearing to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and Axos Clearing has to purchase or sell the financial instrument underlying the contract at a loss. Axos Clearing’s clearing agreements with broker-dealers for which it provides clearing services requires them to indemnify Axos Clearing if customers fail to satisfy their contractual obligation.

CAPITAL RESOURCES AND REQUIREMENTS

Our Company and Bank are subject to regulatory capital adequacy requirements promulgated by federal bank regulatory agencies. Failure by our Company or Bank to meet minimum capital requirements could result in certain mandatory and discretionary actions by regulators that could have a material adverse effect on our results of operations or financial condition. The Federal Reserve establishes capital requirements for our Company and the OCC has similar requirements for our Bank. Under these capital requirements and the regulatory framework for prompt corrective action, our Company and Bank must meet specific capital guidelines that involve quantitative measures of our Company and Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Our Company’s and Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors.

Quantitative measures established by regulation require our Company and Bank to maintain certain minimum capital amounts and ratios. Federal bank regulators require our Company and Bank to maintain minimum ratios of tier 1 capital to adjusted average assets of 4.0%, common equity tier 1 capital to risk-weighted assets of 4.5%, tier 1 capital to risk-weighted assets of 6.0% and total risk-based capital to risk-weighted assets of 8.0%. To be “well capitalized,” our Company and Bank must maintain minimum leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios of at least 5.0%, 6.5%, 8.0% and 10.0%, respectively. At September 30, 2023, our Company and Bank met all the capital adequacy requirements to which they were subject and were “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since September 30, 2023 that would materially adversely change the Company’s and Bank’s capital classifications. From time to time, we may need to raise additional capital to support our Company’s and Bank’s further growth and to maintain their “well capitalized” status.

The Company and Bank both elected the five-year current expected credit losses (“CECL”) transition guidance for calculating regulatory capital and ratios and the September 30, 2023 and June 30, 2023 amounts reflect this election. This guidance allowed an entity to add back to regulatory capital 100% of the impact of the day-one CECL transition adjustment and 25% of subsequent increases to the allowance for credit losses through June 30, 2023. Through fiscal year 2024, this cumulative amount is phased out of regulatory capital at 50% and the cumulative amount will be 100% phased out of regulatory capital beginning in fiscal year 2026.

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The Company’s and Bank’s estimated capital amounts, capital ratios and capital requirements under Basel III were as follows:

	Axos Financial, Inc.						Axos Bank						“Well  Capitalized” Ratio	Minimum Capital Ratio
(Dollars in thousands)	September 30, 2023			June 30, 2023			September 30, 2023			June 30, 2023
Regulatory Capital:
Tier 1	$	1,849,512		$	1,796,352		$	1,908,523		$	1,866,705
Common equity tier 1	$	1,849,512		$	1,796,352		$	1,908,523		$	1,866,705
Total capital	$	2,340,058		$	2,269,237		$	2,066,485		$	2,007,006
Assets:
Average adjusted	$	19,958,125		$	20,059,002		$	19,104,823		$	19,284,378
Total risk-weighted	$	16,643,750		$	16,414,213		$	16,329,763		$	16,054,633
Regulatory Capital Ratios:
Tier 1 leverage (to adjusted average assets)	9.27		%	8.96		%	9.99		%	9.68		%	5.00%	4.00%
Common equity tier 1 capital (to risk-weighted assets)	11.11		%	10.94		%	11.69		%	11.63		%	6.50%	4.50%
Tier 1 capital (to risk-weighted assets)	11.11		%	10.94		%	11.69		%	11.63		%	8.00%	6.00%
Total capital (to risk-weighted assets)	14.06		%	13.82		%	12.65		%	12.50		%	10.00%	8.00%

Basel III requires all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively composed of common equity tier 1 capital, and it applies to each of the three risk-based capital ratios but not the leverage ratio. At September 30, 2023 and June 30, 2023, our Company and Bank were in compliance with the capital conservation buffer requirement, which sets the common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratio minimums to 7.0%, 8.5% and 10.5%, respectively.

Securities Business

Pursuant to the net capital requirements of the Exchange Act, Axos Clearing, is subject to the SEC Uniform Net Capital (Rule 15c3-1 of the Exchange Act). Under this rule, the Company has elected to operate under the alternate method and is required to maintain minimum net capital of $250,000 or 2% of aggregate debit balances arising from client transactions, as defined. Under the alternate method, the Company may not repay subordinated debt, pay cash distributions, or make any unsecured advances or loans to its parent or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement.

The net capital positions of Axos Clearing were as follows:

(Dollars in thousands)	September 30, 2023			June 30, 2023
Net capital	$	101,391		$	35,221
Excess Capital	$	96,211		$	29,905
Net capital as a percentage of aggregate debit items	39.14		%	13.25		%
Net capital in excess of 5% aggregate debit items	$	88,440		$	21,930

Axos Clearing, as a clearing broker, is subject to SEC Customer Protection Rule (Rule 15c3-3 of the Exchange Act) which requires segregation of funds in a special reserve account for the benefit of customers. At September 30, 2023, the Company calculated a deposit requirement of $174.1 million and maintained a deposit of $228.4 million. On October 2, 2023, the Company made a withdrawal of $39.0 million.

Certain broker-dealers have chosen to maintain brokerage customer accounts at Axos Clearing. To allow these broker-dealers to classify their assets held by the Company as allowable assets in their computation of net capital, the Company computes a separate reserve requirement for Proprietary Accounts of Brokers (“PAB”). At September 30, 2023, the Company

41

calculated a deposit requirement of $16.8 million and maintained a deposit of $23.6 million. On October 3, 2023, the Company made a deposit of $9.0 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For further discussion of the Company’s market risk, see Item 7A—“Quantitative and Qualitative Disclosures About Market Risk” in the 2023 Form 10-K.

We measure interest rate sensitivity as the difference between amounts of interest-earning assets and interest-bearing liabilities that mature or contractually re-price within a given period of time. The difference, or the interest rate sensitivity gap, provides an indication of the extent to which an institution’s interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities and negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. In a rising interest rate environment, an institution with a positive gap would be in a better position than an institution with a negative gap to invest in higher yielding assets or to have its asset yields adjusted upward, which would cause the yield on its assets to increase at a faster pace than the cost of its interest-bearing liabilities. During a period of falling interest rates, however, an institution with a positive gap would tend to have its assets reprice at a faster rate than one with a negative gap, which would tend to reduce the growth in its net interest income.

Banking Business

The following table sets forth the amounts of interest earning assets and interest bearing liabilities that were outstanding at September 30, 2023 and the portions of each financial instrument that are expected to mature or reset interest rates in each future period:

	Term to Repricing, Repayment, or Maturity at
	September 30, 2023
(Dollars in thousands)	Six Months or Less			Over Six Months Through One Year			Over One Year Through Five Years			Over Five Years			Total
Interest-earning assets:
Cash and cash equivalents	$	2,128,458		$	—		$	—		$	—		$	2,128,458
Mortgage-backed and other investment securities1	208,124			3,278			14,774			16,669			242,845
Stock of the FHLB, at cost	17,250			—			—			—			17,250
Loans2	11,868,676			1,264,688			3,762,371			209,367			17,105,102
Loans held for sale	8,014			—			—			—			8,014
Total interest-earning assets	14,230,522			1,267,966			3,777,145			226,036			19,501,669
Non-interest earning assets	—			—			—			—			427,658
Total assets	$	14,230,522		$	1,267,966		$	3,777,145		$	226,036		$	19,929,327
Interest-bearing liabilities:
Interest-bearing deposits3	$	8,244,752		$	6,367,010		$	153,349		$	118		$	14,765,229
Advances from the FHLB	—			—			30,000			60,000			90,000
Total interest-bearing liabilities	8,244,752			6,367,010			183,349			60,118			14,855,229
Other non-interest-bearing liabilities	—			—			—			—			3,138,062
Stockholders’ equity	—			—			—			—			1,936,036
Total liabilities and equity	$	8,244,752		$	6,367,010		$	183,349		$	60,118		$	19,929,327
Net interest rate sensitivity gap	$	5,985,770		$	(5,099,044)		$	3,593,796		$	165,918		$	4,646,440
Cumulative gap	$	5,985,770		$	886,726		$	4,480,522		$	4,646,440		$	4,646,440
Net interest rate sensitivity gap—as a % of total interest earning assets	30.69		%	(26.15)		%	18.43		%	0.85		%	23.83		%
Cumulative gap—as % of total cumulative interest earning assets	30.69		%	4.55		%	22.98		%	23.83		%	23.83		%

1 Comprised of U.S. government securities, mortgage-backed securities and other securities, which are classified as trading and available-for-sale. The table reflects contractual repricing dates.

2 Loans includes loan premiums, discounts and unearned fees. The table reflects either contractual repricing dates, or maturities.

3 The table assumes that the principal balances for demand deposits and savings accounts will reprice in the first year.

The above table provides an approximation of the projected re-pricing of assets and liabilities at September 30, 2023 on the basis of contractual maturities, adjusted for anticipated prepayments of principal and scheduled rate adjustments. The loan and securities prepayment rates reflected herein are based on historical experience. For the non-maturity deposit liabilities, we use decay rates and rate adjustments based upon our historical experience. Actual repayments of these instruments could vary substantially if future experience differs from our historic experience.

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Although “gap” analysis is a useful measurement device available to management in determining the existence of interest rate exposure, its static focus as of a particular date makes it necessary to utilize other techniques in measuring exposure to changes in interest rates. For example, gap analysis is limited in its ability to predict trends in future earnings and makes no assumptions about changes in prepayment tendencies, deposit or loan maturity preferences or repricing time lags that may occur in response to a change in the interest rate environment.

The following table indicates the sensitivity of net interest income movements to parallel instantaneous shocks in interest rates for the future 1-12 months and 13-24 months’ time periods. For purposes of modeling net interest income sensitivity, we assume no growth in the balance sheet other than for retained earnings:

	As of September 30, 2023
	First 12 Months				Next 12 Months
(Dollars in thousands)	Net Interest Income		Percentage Change from Base		Net Interest Income		Percentage Change from Base
Up 200 basis points	$	1,114,749	19.9	%	$	1,115,044	9.0	%
Base	$	930,076	—	%	$	1,022,953	—	%
Down 200 basis points	$	830,228	(10.7)	%	$	958,412	(6.3)	%

We attempt to measure the effect market interest rate changes will have on the net present value of assets and liabilities, which is defined as market value of equity. We analyze the market value of equity sensitivity to an immediate parallel and sustained shift in interest rates derived from the underlying interest rate curves.

The following table indicates the sensitivity of market value of equity to the interest rate movement described above:

	As of September 30, 2023
(Dollars in thousands)	Net Present Value		Percentage Change from Base		Net Present Value as a Percentage of Assets
Up 200 basis points	$	1,904,855	(4.4)	%	9.7	%
Up 100 basis points	$	1,963,356	(1.5)	%	9.9	%
Base	$	1,993,257	—	%	10.0	%
Down 100 basis points	$	1,991,616	(0.1)	%	10.0	%
Down 200 basis points	$	2,049,225	2.8	%	10.1	%

The computation of the prospective effects of hypothetical interest rate changes is based on numerous assumptions, including relative levels of interest rates, asset prepayments, runoffs in deposits and changes in repricing levels of deposits to general market rates, and should not be relied upon as indicative of actual results. Furthermore, these computations do not take into account any actions that we may undertake in response to future changes in interest rates. Those actions include, but are not limited to, making change in loan and deposit interest rates and changes in our asset and liability mix.

Securities Business

Our Securities Business is exposed to market risk primarily due to its role as a financial intermediary in customer, broker-dealer, and registered investment advisor transactions, which may include purchases and sales of securities, securities lending activities, and in our trading activities, which are used to support sales, underwriting and other customer activities. We are subject to the risk of loss that may result from the potential change in value of a financial instrument as a result of fluctuations in interest rates, market prices, investor expectations and changes in credit ratings of the issuer.

Our Securities Business is exposed to interest rate risk as a result of maintaining inventories of interest rate sensitive financial instruments and other interest earning assets, including customer and correspondent margin loans and securities borrowing activities. Our exposure to interest rate risk is also from our funding sources including customer and correspondent cash balances, bank borrowings and securities lending activities. Interest rates on customer and correspondent balances and securities produce a positive spread with rates generally fluctuating in parallel.

With respect to securities held, our interest rate risk is managed by setting and monitoring limits on the size and duration of positions and on the length of time securities can be held. Many of the interest rates on customer and correspondent margin loans are indexed and can vary daily. Our funding sources are generally short term with interest rates that can vary daily.

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Our Securities Business is engaged in various brokerage and trading activities that expose us to credit risk arising from potential non-performance from counterparties, customers or issuers of securities. This risk is managed by setting and monitoring position limits for each counterparty, conducting periodic credit reviews of counterparties, reviewing concentrations of securities and conducting business through central clearing organizations.

Collateral underlying margin loans to customers and correspondents and with respect to securities lending activities is marked to market daily and additional collateral is required as necessary.

ITEM 4.CONTROLS AND PROCEDURES

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer along with our Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In addition, there were no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2023 (as defined in Exchange Act Rule 13a-15(f)) that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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PART II—OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

The information set forth in Note 8—“Commitments And Contingencies” to the Unaudited Condensed Consolidated Financial Statements is incorporated herein by reference.

In addition, from time to time we may be a party to other claims or litigation that arise in the ordinary course of business, such as claims to enforce liens, claims involving the origination and servicing of loans, and other issues related to the Company’s business operations. None of such matters are expected to have a material adverse effect on the Company’s financial condition, results of operations or business.

ITEM 1A.RISK FACTORS

We face a variety of risks that are inherent in our business and our industry. These risks are described in more detail under Item 1A. “Risk Factors” in our 2023 Form 10-K. We encourage you to read these factors in their entirety. Moreover, other factors may also exist that we cannot anticipate or that we currently do not consider to be significant based on information that is currently available.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth our market repurchases of Axos common stock and the Axos common shares retained in connection with net settlement of restricted stock awards during the quarter ended September 30, 2023.

(Dollars in thousands, except per share data)	Number of Shares Purchased	Average Price Paid Per Shares		Total Number of Shares Purchased as Part of Publicly  Announced Plans or Programs	Approximate Dollar value of Shares that May Yet be Purchased Under the Plans or Programs
Stock Repurchases1,2
Quarter Ended September 30, 2023
July 1, 2023 to July 31, 2023	7,435	$	38.12	7,435	$	103,378
August 1, 2023 to August 31, 2023	—	$	—	—	$	103,378
September 1, 2023 to September 30, 2023	640,773	$	37.85	640,773	$	79,126
For the Three Months Ended September 30, 2023	648,208	$	37.85	648,208	$	79,126
Stock Retained in Net Settlement3
July 1, 2023 to July 31, 2023	252
August 1, 2023 to August 31, 2023	97,768
September 1, 2023 to September 30, 2023	53,648
For the Three Months Ended September 30, 2023	151,668

1 On April 27, 2023, the Company announced a program to repurchase up to $100 million of its common stock. The share repurchase authorization is in addition to the existing share repurchase plan announced on August 6, 2019. The share repurchase program will continue in effect until terminated by the Board of Directors of the Company.

2 On August 6, 2019, the Company announced a program to repurchase up to $100 million of its common stock. Purchases were made in open-market transactions and the remaining capacity was used in its entirety in the three months ended September 30, 2023.

3 The Amended and Restated 2014 Stock Incentive Plan permits net settlement of stock issuances related to equity awards for purposes of payment of a grantee’s minimum income tax obligation. Stock Retained in Net Settlement was purchased at the vesting price of the associated restricted stock unit.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.    OTHER INFORMATION

    None.

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ITEM 6.EXHIBITS

Exhibit Number	Description	Incorporated By Reference to
31.1	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
31.2	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.
32.1	Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.
32.2	Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.
101.INS	Inline XBRL Instance Document	The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema Document	Filed herewith.
101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document	Filed herewith.
101.LAB	Inline XBRL Taxonomy Label Linkbase Document	Filed herewith.
101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document	Filed herewith.
101.DEF	Inline XBRL Taxonomy Definition Document	Filed herewith.
104	Cover Page Interactive Data File	Formatted as Inline XBRL and contained in Exhibit 101

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			Axos Financial, Inc.
Dated:	October 26, 2023	By:	/s/ Gregory Garrabrants
			Gregory Garrabrants President and Chief Executive Officer (Principal Executive Officer)
Dated:	October 26, 2023	By:	/s/ Derrick K. Walsh
			Derrick K. Walsh Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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