UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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

For the ~~Quarterly Period~~quarterly period ended ~~September 30, 2021~~March 31, 2022


☐			TRANSITION REPORT ~~UNDER~~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

~~Securities registered pursuant to Section 12(g) of the Act:~~

~~None~~

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: ~~59,495,242~~59,663,388 shares of common stock, $0.01 par value per share, as of ~~October 20, 2021.~~April 21, 2022.

Table of Contents

AXOS FINANCIAL, INC.

INDEX


			Page
PART I – FINANCIAL INFORMATION			1

ITEM 1. FINANCIAL STATEMENTS			1
Condensed Consolidated Balance Sheets (unaudited) as of ~~September 30, 2021~~March 31, 2022 and June 30, ~~202~~12021			1
Condensed Consolidated Statements of Income (unaudited) for the three and nine months ended ~~September 30, 2021~~March 31, 202 2 and ~~2020~~202 1			2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended ~~September 30, 2021~~ March 31, 20 22 and ~~2020~~202 1			3
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three and nine months ended ~~September 30, 2021~~ March 31, 202 2 and ~~2020~~202 1			4
Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~three~~nine months ended ~~September 30, 2021~~March 31, 202 2 and ~~2020~~202 1			56
Notes to Condensed Consolidated Financial Statements			78

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			2729
SELECTED FINANCIAL DATA			3133
RESULTS OF OPERATIONS			3335
FINANCIAL CONDITION			4247
LIQUIDITY			4651
OFF-BALANCE SHEET COMMITMENTS			4652
CAPITAL RESOURCES AND REQUIREMENTS			4752
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			4854

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS			5156

ITEM 4. CONTROLS AND PROCEDURES			5156

PART II – OTHER INFORMATION			5257

ITEM 1. LEGAL PROCEEDINGS			5257

ITEM 1A. RISK FACTORS			5257

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			5257

ITEM 3. DEFAULTS UPON SENIOR SECURITIES			5257

ITEM 4. MINE SAFETY DISCLOSURES			5257

ITEM 5. OTHER INFORMATION			5257

ITEM 6. EXHIBITS			5358

SIGNATURES			5459

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Dollars in thousands, except par and stated value)	(Dollars in thousands, except par and stated value)	September 30, 2021		June 30, 2021		(Dollars in thousands, except par and stated value)	March 31, 2022		June 30, 2021
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	1,000,076	$	715,624	Cash and cash equivalents	$	998,348	$	715,624
Cash segregated for regulatory purposes	Cash segregated for regulatory purposes	269,358		322,153		Cash segregated for regulatory purposes	250,966		322,153

Total cash, cash equivalents, and cash segregated	Total cash, cash equivalents, and cash segregated	1,269,434		1,037,777		Total cash, cash equivalents, and cash segregated	1,249,314		1,037,777
Securities:	Securities:					Securities:
Trading	Trading	1,941		1,983		Trading	366		1,983
Available-for-sale	Available-for-sale	135,996		187,335		Available-for-sale	229,510		187,335

Stock of regulatory agencies	Stock of regulatory agencies	20,368		19,995		Stock of regulatory agencies	20,368		19,995
Loans held for sale, carried at fair value	Loans held for sale, carried at fair value	33,344		29,768		Loans held for sale, carried at fair value	19,611		29,768
Loans held for sale, lower of cost or fair value	Loans held for sale, lower of cost or fair value	11,949		12,294		Loans held for sale, lower of cost or fair value	11,182		12,294
Loans—net of allowance for credit losses of $136.8 million as of September 30, 2021 and $133.0 million as of June 30, 2021		11,879,021		11,414,814
Loans—net of allowance for credit losses of $143.4 million as of March 31, 2022 and $133.0 million as of June 30, 2021						Loans—net of allowance for credit losses of $143.4 million as of March 31, 2022 and $133.0 million as of June 30, 2021	13,093,603		11,414,814

Mortgage servicing rights, carried at fair value	Mortgage servicing rights, carried at fair value	18,438		17,911		Mortgage servicing rights, carried at fair value	23,519		17,911
Other real estate owned and repossessed vehicles	Other real estate owned and repossessed vehicles	6,320		6,782		Other real estate owned and repossessed vehicles	564		6,782

Goodwill and other intangible assets—net	Goodwill and other intangible assets—net	164,944		115,972		Goodwill and other intangible assets—net	159,150		115,972
Securities borrowed	Securities borrowed	457,282		619,088		Securities borrowed	274,644		619,088
Customer, broker-dealer and clearing receivables	Customer, broker-dealer and clearing receivables	427,169		369,815		Customer, broker-dealer and clearing receivables	510,561		369,815
Other assets	Other assets	480,544		432,031		Other assets	488,558		432,031
TOTAL ASSETS	TOTAL ASSETS	$	14,906,750	$	14,265,565	TOTAL ASSETS	$	16,080,950	$	14,265,565

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:	Deposits:					Deposits:
Non-interest bearing	Non-interest bearing	$	3,632,521	$	2,474,424	Non-interest bearing	$	4,135,278	$	2,474,424
Interest bearing	Interest bearing	8,114,921		8,341,373		Interest bearing	8,597,724		8,341,373
Total deposits	Total deposits	11,747,442		10,815,797		Total deposits	12,733,002		10,815,797

Advances from the Federal Home Loan Bank	Advances from the Federal Home Loan Bank	157,500		353,500		Advances from the Federal Home Loan Bank	152,500		353,500
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	255,896		221,358		Borrowings, subordinated notes and debentures	381,682		221,358

Securities loaned	Securities loaned	539,505		728,988		Securities loaned	447,748		728,988
Customer, broker-dealer and clearing payables	Customer, broker-dealer and clearing payables	510,040		535,425		Customer, broker-dealer and clearing payables	543,905		535,425
Accounts payable and accrued liabilities and other liabilities	Accounts payable and accrued liabilities and other liabilities	237,746		209,561		Accounts payable and accrued liabilities and other liabilities	236,528		209,561
Total liabilities	Total liabilities	13,448,129		12,864,629		Total liabilities	14,495,365		12,864,629

STOCKHOLDERS’ EQUITY:	STOCKHOLDERS’ EQUITY:					STOCKHOLDERS’ EQUITY:
Preferred stock—$0.01 par value; 1,000,000 shares authorized:	Preferred stock—$0.01 par value; 1,000,000 shares authorized:					Preferred stock—$0.01 par value; 1,000,000 shares authorized:

Common stock—$0.01 par value; 150,000,000 shares authorized; 68,370,617 shares issued and 59,494,633 shares outstanding as of September 30, 2021; 68,069,321 shares issued and 59,317,944 shares outstanding as of June 30, 2021		684		681
Common stock—$0.01 par value; 150,000,000 shares authorized; 68,617,410 shares issued and 59,662,795 shares outstanding as of March 31, 2022; 68,069,321 shares issued and 59,317,944 shares outstanding as of June 30, 2021						Common stock—$0.01 par value; 150,000,000 shares authorized; 68,617,410 shares issued and 59,662,795 shares outstanding as of March 31, 2022; 68,069,321 shares issued and 59,317,944 shares outstanding as of June 30, 2021	686		681
Additional paid-in capital	Additional paid-in capital	436,528		432,550		Additional paid-in capital	448,428		432,550
Accumulated other comprehensive income (loss)—net of tax	Accumulated other comprehensive income (loss)—net of tax	2,000		2,507		Accumulated other comprehensive income (loss)—net of tax	(1,626)		2,507
Retained earnings	Retained earnings	1,247,938		1,187,728		Retained earnings	1,370,548		1,187,728
Treasury stock, at cost; 8,875,984 shares as of September 30, 2021 and 8,751,377 shares as of June 30, 2021		(228,529)		(222,530)
Treasury stock, at cost; 8,954,615 shares as of March 31, 2022 and 8,751,377 shares as of June 30, 2021						Treasury stock, at cost; 8,954,615 shares as of March 31, 2022 and 8,751,377 shares as of June 30, 2021	(232,451)		(222,530)
Total stockholders’ equity	Total stockholders’ equity	1,458,621		1,400,936		Total stockholders’ equity	1,585,585		1,400,936
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	14,906,750	$	14,265,565	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	16,080,950	$	14,265,565

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


		Three Months Ended				Three Months Ended				Nine Months Ended
		September 30,				March 31,				March 31,
(Dollars in thousands, except earnings per common share)	(Dollars in thousands, except earnings per common share)	2021		2020			(Dollars in thousands, except earnings per common share)	2022		2021		2022		2021
INTEREST AND DIVIDEND INCOME:	INTEREST AND DIVIDEND INCOME:						INTEREST AND DIVIDEND INCOME:
Loans, including fees	Loans, including fees	$	149,176	$	141,424		Loans, including fees	$	153,873	$	147,936	$	452,518	$	436,445
Securities borrowed and customer receivables	Securities borrowed and customer receivables	6,851		5,077			Securities borrowed and customer receivables	3,833		4,453		16,050		14,196
Investments	Investments	2,283		3,388			Investments	2,475		3,285		6,999		10,301
Total interest and dividend income	Total interest and dividend income	158,310		149,889			Total interest and dividend income	160,181		155,674		475,567		460,942
INTEREST EXPENSE:	INTEREST EXPENSE:						INTEREST EXPENSE:
Deposits	Deposits	7,712		19,554			Deposits	6,924		14,034		22,441		49,683
Advances from the Federal Home Loan Bank	Advances from the Federal Home Loan Bank	1,016		1,372			Advances from the Federal Home Loan Bank	973		992		2,962		3,690
Securities loaned	Securities loaned	251		124			Securities loaned	152		453		621		832
Other borrowings	Other borrowings	2,689		1,512			Other borrowings	2,594		4,526		7,795		9,649
Total interest expense	Total interest expense	11,668		22,562			Total interest expense	10,643		20,005		33,819		63,854
Net interest income	Net interest income	146,642		127,327			Net interest income	149,538		135,669		441,748		397,088
Provision for credit losses	Provision for credit losses	4,000		11,800			Provision for credit losses	4,500		2,700		12,500		22,500
Net interest income, after provision for credit losses	Net interest income, after provision for credit losses	142,642		115,527			Net interest income, after provision for credit losses	145,038		132,969		429,248		374,588
NON-INTEREST INCOME:	NON-INTEREST INCOME:						NON-INTEREST INCOME:

Prepayment penalty fee income	Prepayment penalty fee income	2,986		1,368			Prepayment penalty fee income	2,793		1,342		9,073		4,289
Gain on sale – other	Gain on sale – other	17		334			Gain on sale – other	61		214		106		704
Mortgage banking income	Mortgage banking income	5,253		19,567			Mortgage banking income	5,729		9,037		15,594		39,255
Broker-dealer fee income	Broker-dealer fee income	11,766		5,702			Broker-dealer fee income	12,913		7,942		39,046		19,931
Banking and service fees	Banking and service fees	6,680		8,884			Banking and service fees	7,278		5,352		22,444		24,281
Total non-interest income	Total non-interest income	26,702		35,855			Total non-interest income	28,774		23,887		86,263		88,460
NON-INTEREST EXPENSE:	NON-INTEREST EXPENSE:						NON-INTEREST EXPENSE:
Salaries and related costs	Salaries and related costs	40,737		38,623			Salaries and related costs	43,133		38,545		123,849		115,367
Data processing	Data processing	12,092		7,928			Data processing	12,274		10,171		36,565		27,772
Depreciation and amortization	Depreciation and amortization	5,728		6,186			Depreciation and amortization	6,061		5,865		18,574		17,913
Advertising and promotional	Advertising and promotional	3,372		2,556			Advertising and promotional	3,357		4,261		10,131		10,600
Professional services	Professional services	4,545		5,999			Professional services	4,346		5,712		14,834		17,340
Occupancy and equipment	Occupancy and equipment	3,181		3,011			Occupancy and equipment	3,742		3,096		10,265		9,239
FDIC and regulatory fees	FDIC and regulatory fees	2,266		2,692			FDIC and regulatory fees	3,115		3,107		7,856		8,400
Broker-dealer clearing charges	Broker-dealer clearing charges	4,005		2,257			Broker-dealer clearing charges	3,561		3,278		11,244		7,986
General and administrative expense	General and administrative expense	8,505		6,294			General and administrative expense	7,230		6,772		23,951		18,033
Total non-interest expense	Total non-interest expense	84,431		75,546			Total non-interest expense	86,819		80,807		257,269		232,650
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	84,913		75,836			INCOME BEFORE INCOME TAXES	86,993		76,049		258,242		230,398
INCOME TAXES	INCOME TAXES	24,703		22,814			INCOME TAXES	25,170		22,404		75,422		68,946
NET INCOME	NET INCOME	$	60,210	$	53,022		NET INCOME	$	61,823	$	53,645	$	182,820	$	161,452
NET INCOME ATTRIBUTABLE TO COMMON STOCK	NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	60,210	$	52,945		NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	61,823	$	53,645	$	182,820	$	161,262
COMPREHENSIVE INCOME	COMPREHENSIVE INCOME	$	59,703	$	54,304		COMPREHENSIVE INCOME	$	58,853	$	54,687	$	178,687	$	164,682
Basic earnings per common share	Basic earnings per common share	$	1.01	$	0.89		Basic earnings per common share	$	1.04	$	0.91	$	3.07	$	2.72
Diluted earnings per common share	Diluted earnings per common share	$	0.99	$	0.88		Diluted earnings per common share	$	1.02	$	0.89	$	3.02	$	2.67

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		Three Months Ended				Three Months Ended				Nine Months Ended
		September 30,				March 31,				March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020			(Dollars in thousands)	2022		2021		2022		2021
NET INCOME	NET INCOME	$	60,210	$	53,022		NET INCOME	$	61,823	$	53,645	$	182,820	$	161,452
Net unrealized gain (loss) from available-for-sale securities, net of tax expense (benefit) of $(214) and $503 for the three months ended September 30, 2021 and 2020, respectively.		(507)		1,282
Net unrealized gain (loss) from available-for-sale securities, net of tax expense (benefit) of $(1,238) and $460 for the three and $(1,726) and $1,400 for the nine months ended March 31, 2022 and 2021, respectively.							Net unrealized gain (loss) from available-for-sale securities, net of tax expense (benefit) of $(1,238) and $460 for the three and $(1,726) and $1,400 for the nine months ended March 31, 2022 and 2021, respectively.	(2,970)		1,042		(4,133)		3,230

Other comprehensive income (loss)	Other comprehensive income (loss)	(507)		1,282			Other comprehensive income (loss)	(2,970)		1,042		(4,133)		3,230
Comprehensive income	Comprehensive income	$	59,703	$	54,304		Comprehensive income	$	58,853	$	54,687	$	178,687	$	164,682

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


		For the Three Months Ended September 30, 2021																					For the Three Months Ended March 31, 2022
		Preferred Stock			Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Treasury Stock		Total					Preferred Stock				Common Stock								Additional Paid-in Capital			Retained Earnings					Accumulated Other Comprehensive Income (Loss), Net of Income Tax					Treasury Stock					Total
					Number of Shares																						Number of Shares
(Dollars in thousands)	(Dollars in thousands)	Shares	Amount		Issued	Treasury	Outstanding	Amount													(Dollars in thousands)		Shares		Amount		Issued		Treasury		Outstanding		Amount
BALANCE—June 30, 2021		—	$	—	68,069,321	(8,751,377)	59,317,944	$	681	$	432,550	$	1,187,728	$	2,507	$	(222,530)	$	1,400,936

BALANCE—December 31, 2021																				BALANCE—December 31, 2021		—		$	—	68,376,837		(8,878,262)		59,498,575		$	684	$		441,061				$	1,308,725				$	1,344				$	(228,657)				$	1,523,157
Net income	Net income	—	—		—	—	—	—		—		60,210		—		—		60,210			Net income		—		—		—		—		—		—		—				61,823					—					—					61,823
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—	—	—		—		—		(507)		—		(507)			Other comprehensive income (loss)		—		—		—		—		—		—		—			—					(2,970)					—					(2,970)

Stock-based compensation expense and restricted stock unit vesting	Stock-based compensation expense and restricted stock unit vesting	—	—		301,296	(124,607)	176,689	3		3,978		—		—		(5,999)		(2,018)			Stock-based compensation expense and restricted stock unit vesting		—		—		240,573		(76,353)		164,220		2		7,367			—					—					(3,794)					3,575

BALANCE—September 30, 2021		—	$	—	68,370,617	(8,875,984)	59,494,633	$	684	$	436,528	$	1,247,938	$	2,000	$	(228,529)	$	1,458,621
BALANCE—March 31, 2022																				BALANCE—March 31, 2022		—		$	—	68,617,410		(8,954,615)		59,662,795		$	686	$	448,428		$	1,370,548				$	(1,626)				$	(232,451)				$	1,585,585


	For the Nine Months Ended March 31, 2022
	Preferred Stock			Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Treasury Stock		Total
				Number of Shares
(Dollars in thousands)	Shares	Amount		Issued	Treasury	Outstanding	Amount
BALANCE—June 30, 2021	—	$	—	68,069,321	(8,751,377)	59,317,944	$	681	$	432,550	$	1,187,728	$	2,507	$	(222,530)	$	1,400,936

Net income	—	—		—	—	—	—		—		182,820		—		—		182,820
Other comprehensive income (loss)	—	—		—	—	—	—		—		—		(4,133)		—		(4,133)







Stock-based compensation expense and restricted stock unit vesting	—	—		548,089	(203,238)	344,851	5		15,878		—		—		(9,921)		5,962

BALANCE—March 31, 2022	—	$	—	68,617,410	(8,954,615)	59,662,795	$	686	$	448,428	$	1,370,548	$	(1,626)	$	(232,451)	$	1,585,585

For the Three Months Ended September 30, 2020
Preferred Stock Common Stock Additional Paid-in Capital Retained
Earnings Accumulated
Other
Comprehensive
Income (Loss),
Net of Income Tax Treasury
Stock Total
Number of Shares
(Dollars in thousands) Shares Amount Issued Treasury Outstanding Amount
BALANCE—June 30, 2020 515 $ 5,063 67,323,053 (7,710,418) 59,612,635 $ 673 $ 411,873 $ 1,009,299 $ (937) $ (195,125) $ 1,230,846
Cumulative effect of change in accounting principle net of tax, ASU No. 2016-13
— — — — — — — (37,088) — — (37,088)
Net income — — — — — — — 53,022 — — 53,022
Other comprehensive income (loss) — — — — — — — — 1,282 — 1,282
Cash dividends on preferred stock — — — — — — — (77) — — (77)
Purchase of treasury stock — — — (582,249) (582,249) — — — — (12,742) (12,742)
Stock-based compensation expense
and restricted stock unit vesting — — 299,882 (114,334) 185,548 3 4,412 — — (2,693) 1,722
BALANCE—September 30, 2020 515 $ 5,063 67,622,935 (8,407,001) 59,215,934 $ 676 $ 416,285 $ 1,025,156 $ 345 $ (210,560) $ 1,236,965

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(Unaudited)



	For the Three Months Ended March 31, 2021
	Preferred Stock			Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Treasury Stock		Total
				Number of Shares
(Dollars in thousands)	Shares	Amount		Issued	Treasury	Outstanding	Amount
BALANCE—December 31, 2020	—	$	—	67,668,664	(8,595,842)	59,072,822	$	677	$	420,895	$	1,079,828	$	1,251	$	(215,169)	$	1,287,482
Net income	—	—		—	—	—	—		—		53,645		—		—		53,645
Other comprehensive income (loss)	—	—		—	—	—	—		—		—		1,042		—		1,042







Stock-based compensation expense and restricted stock unit vesting	—	—		233,575	(68,632)	164,943	2		6,768		—		—		(3,289)		3,481

BALANCE—March 31, 2021	—	$	—	67,902,239	(8,664,474)	59,237,765	$	679	$	427,663	$	1,133,473	$	2,293	$	(218,458)	$	1,345,650


	For the Nine Months Ended March 31, 2021
	Preferred Stock			Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Treasury Stock		Total
				Number of Shares
(Dollars in thousands)	Shares	Amount		Issued	Treasury	Outstanding	Amount
BALANCE—June 30, 2020	515	$	5,063	67,323,053	(7,710,418)	59,612,635	$	673	$	411,873	$	1,009,299	$	(937)	$	(195,125)	$	1,230,846
Cumulative effect of change in accounting principle net of tax, adoption of ASU No. 2016-13	—	—		—	—	—	—		—		(37,088)		—		—		(37,088)
Net income	—	—		—	—	—	—		—		161,452		—		—		161,452
Other comprehensive income (loss)	—	—		—	—	—	—		—		—		3,230		—		3,230

Cash dividends on preferred stock	—	—		—	—	—	—		—		(103)		—		—		(103)

Preferred stock - Series A redemption	(515)	(5,063)		—	—	—	—		—		(87)		—		—		(5,150)
Purchase of treasury stock	—	—		—	(753,597)	(753,597)	—		—		—		—		(16,757)		(16,757)


Stock-based compensation expense and restricted stock unit vesting	—	—		579,186	(200,459)	378,727	6		15,790		—		—		(6,576)		9,220

BALANCE—March 31, 2021	—	$	—	67,902,239	(8,664,474)	59,237,765	$	679	$	427,663	$	1,133,473	$	2,293	$	(218,458)	$	1,345,650

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Three Months Ended					Nine Months Ended
		September 30,					March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		(Dollars in thousands)	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:	CASH FLOWS FROM OPERATING ACTIVITIES:					CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	Net income	$	60,210	$	53,022	Net income	$	182,820	$	161,452
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Accretion and amortization on securities, net	Accretion and amortization on securities, net	(104)		49		Accretion and amortization on securities, net	(297)		(124)
Net accretion of discounts on loans and leases	Net accretion of discounts on loans and leases	(2,137)		(1,492)		Net accretion of discounts on loans and leases	(5,143)		(4,717)
Amortization of borrowing costs	Amortization of borrowing costs	139		52		Amortization of borrowing costs	447		1,431

Amortization of operating lease right of use asset	Amortization of operating lease right of use asset	2,346		2,655		Amortization of operating lease right of use asset	8,147		7,965
Stock-based compensation expense	Stock-based compensation expense	3,981		4,415		Stock-based compensation expense	15,883		15,796
Trading activity	Trading activity	42		(318)		Trading activity	1,617		42

Provision for credit losses	Provision for credit losses	4,000		11,800		Provision for credit losses	12,500		22,500

Deferred income taxes	Deferred income taxes	1,453		(4,264)		Deferred income taxes	(4,184)		(10,388)
Origination of loans held for sale	Origination of loans held for sale	(209,967)		(440,804)		Origination of loans held for sale	(569,614)		(1,349,683)
Unrealized (gain) loss on loans held for sale		(22)		(1,303)
Unrealized loss on loans held for sale						Unrealized loss on loans held for sale	965		781
Gain on sales of loans held for sale	Gain on sales of loans held for sale	(5,270)		(19,901)		Gain on sales of loans held for sale	(15,700)		(39,959)
Proceeds from sale of loans held for sale	Proceeds from sale of loans held for sale	211,674		424,987		Proceeds from sale of loans held for sale	592,803		1,378,323
Amortization and change in fair value of mortgage servicing rights	Amortization and change in fair value of mortgage servicing rights	1,185		1,795		Amortization and change in fair value of mortgage servicing rights	(1,229)		5,266
(Gain) loss on sale of other real estate and foreclosed assets		(33)		(128)
(Gain) on sale of other real estate and foreclosed assets						(Gain) on sale of other real estate and foreclosed assets	(385)		(113)
Depreciation and amortization	Depreciation and amortization	5,728		6,186		Depreciation and amortization	18,574		17,913
Net changes in assets and liabilities which provide (use) cash:	Net changes in assets and liabilities which provide (use) cash:					Net changes in assets and liabilities which provide (use) cash:

Securities borrowed	Securities borrowed	161,806		(41,102)		Securities borrowed	344,444		(321,170)
Customer, broker-dealer and clearing receivables	Customer, broker-dealer and clearing receivables	(53,677)		(62,859)		Customer, broker-dealer and clearing receivables	(137,069)		(130,797)
Other assets	Other assets	(118,876)		52,570		Other assets	(121,125)		40,162

Securities loaned	Securities loaned	(189,483)		60,031		Securities loaned	(281,240)		393,892
Customer, broker-dealer and clearing payables	Customer, broker-dealer and clearing payables	(25,385)		21,814		Customer, broker-dealer and clearing payables	8,480		136,063
Accounts payable and other liabilities	Accounts payable and other liabilities	18,949		(914)		Accounts payable and other liabilities	14,516		(11,908)
Net cash provided by operating activities	Net cash provided by operating activities	(133,441)		66,291		Net cash provided by operating activities	65,210		312,727
CASH FLOWS FROM INVESTING ACTIVITIES:	CASH FLOWS FROM INVESTING ACTIVITIES:					CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities	Purchases of investment securities	(7,033)		(22,071)		Purchases of investment securities	(107,286)		(66,617)
Proceeds from sales of securities	Proceeds from sales of securities	75,022		—		Proceeds from sales of securities	75,023		—
Proceeds from repayment of securities	Proceeds from repayment of securities	57,756		24,984		Proceeds from repayment of securities	59,549		57,518
Purchase of stock of regulatory agencies	Purchase of stock of regulatory agencies	(8,219)		—		Purchase of stock of regulatory agencies	(22,739)		(17)
Proceeds from redemption of stock of regulatory agencies	Proceeds from redemption of stock of regulatory agencies	8,219		—		Proceeds from redemption of stock of regulatory agencies	22,739		—
Origination of loans held for investment	Origination of loans held for investment	(2,050,587)		(1,081,681)		Origination of loans held for investment	(7,173,040)		(3,936,776)
Proceeds from sale of loans held for investment	Proceeds from sale of loans held for investment	12,100		9,220		Proceeds from sale of loans held for investment	106,324		18,011
Mortgage warehouse loans activity, net	Mortgage warehouse loans activity, net	(41,692)		(249,131)		Mortgage warehouse loans activity, net	191,291		(493,764)
Proceeds from sales of other real estate owned and repossessed assets	Proceeds from sales of other real estate owned and repossessed assets	621		487		Proceeds from sales of other real estate owned and repossessed assets	7,968		839

Acquisition of business activity, net of cash paid	Acquisition of business activity, net of cash paid	(54,597)		—		Acquisition of business activity, net of cash paid	(54,597)		—
Purchases of loans and leases, net of discounts and premiums	Purchases of loans and leases, net of discounts and premiums	(7,481)		—		Purchases of loans and leases, net of discounts and premiums	(31,496)		(2,184)
Principal repayments on loans	Principal repayments on loans	1,620,886		1,003,843		Principal repayments on loans	5,218,247		3,305,931
Purchases of furniture, equipment, software and intangibles	Purchases of furniture, equipment, software and intangibles	(3,943)		(1,754)		Purchases of furniture, equipment, software and intangibles	(11,817)		(8,986)
Net cash used in investing activities	Net cash used in investing activities	(398,948)		(316,103)		Net cash used in investing activities	(1,719,834)		(1,126,045)

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Three Months Ended					Nine Months Ended
		September 30,					March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		(Dollars in thousands)	2022		2021
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	Net increase in deposits	931,645		(781,036)		Net increase in deposits	1,917,205		275,807

Payments of the Federal Home Loan Bank term advances	Payments of the Federal Home Loan Bank term advances	(10,000)		—		Payments of the Federal Home Loan Bank term advances	(15,000)		(65,000)
Net (repayment) proceeds of Federal Home Loan Bank other advances		(186,000)		—
Net proceeds (repayments) of other borrowings		34,400		45,600

Net repayment of Federal Home Loan Bank other advances						Net repayment of Federal Home Loan Bank other advances	(186,000)		(5,000)
Net proceeds of other borrowings						Net proceeds of other borrowings	11,800		7,281
Redemption of subordinated notes						Redemption of subordinated notes	—		(51,000)

Tax payments related to settlement of restricted stock units	Tax payments related to settlement of restricted stock units	(5,999)		(2,693)		Tax payments related to settlement of restricted stock units	(9,921)		(6,576)

Redemption of preferred stock, Series A						Redemption of preferred stock, Series A	—		(5,150)
Repurchase of treasury stock	Repurchase of treasury stock	—		(12,742)		Repurchase of treasury stock	—		(16,757)
Cash dividends paid on preferred stock	Cash dividends paid on preferred stock	—		(77)		Cash dividends paid on preferred stock	—		(103)
Payment of debt issuance costs	Payment of debt issuance costs	—		(2,598)		Payment of debt issuance costs	(1,923)		(2,748)
Proceeds from issuance of subordinated notes	Proceeds from issuance of subordinated notes	—		175,000		Proceeds from issuance of subordinated notes	150,000		175,000
Net cash provided by financing activities	Net cash provided by financing activities	764,046		(578,546)		Net cash provided by financing activities	1,866,161		305,754
NET CHANGE IN CASH AND CASH EQUIVALENTS	NET CHANGE IN CASH AND CASH EQUIVALENTS	231,657		(828,358)		NET CHANGE IN CASH AND CASH EQUIVALENTS	211,537		(507,564)
CASH AND CASH EQUIVALENTS—Beginning of year	CASH AND CASH EQUIVALENTS—Beginning of year	$	1,037,777	$	1,950,519	CASH AND CASH EQUIVALENTS—Beginning of year	$	1,037,777	$	1,950,519
CASH AND CASH EQUIVALENTS—End of period	CASH AND CASH EQUIVALENTS—End of period	$	1,269,434	$	1,122,161	CASH AND CASH EQUIVALENTS—End of period	$	1,249,314	$	1,442,955

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on deposits and borrowed funds	Interest paid on deposits and borrowed funds	$	14,989	$	22,316	Interest paid on deposits and borrowed funds	$	31,974	$	59,154
Income taxes paid	Income taxes paid	29,955		16,318		Income taxes paid	80,512		72,236
Transfers to other real estate and repossessed vehicles	Transfers to other real estate and repossessed vehicles	140		350		Transfers to other real estate and repossessed vehicles	1,186		1,223
Transfers from loans held for investment to loans held for sale	Transfers from loans held for investment to loans held for sale	12,100		2,189		Transfers from loans held for investment to loans held for sale	105,884		8,680
Transfers from loans held for sale to loans held for investment	Transfers from loans held for sale to loans held for investment	376		27,379		Transfers from loans held for sale to loans held for investment	1,410		28,125

Operating lease liabilities for obtaining right of use assets	Operating lease liabilities for obtaining right of use assets	7,842		—		Operating lease liabilities for obtaining right of use assets	12,009		—
Impact of adoption of ASU No. 2016-13 on retained earnings	Impact of adoption of ASU No. 2016-13 on retained earnings	—		37,088		Impact of adoption of ASU No. 2016-13 on retained earnings	—		37,088

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTH ~~PERIOD~~PERIODS ENDED ~~SEPTEMBER 30,~~MARCH 31, 2022 AND 2021 ~~AND 2020~~

(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 (the “Axos Nevada Holding”) and collectively, the “Company”. Axos Nevada Holding wholly owns the companies constituting the Securities Business segment. All significant intercompany balances and transactions have been eliminated in consolidation.

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. Results for the ~~three~~nine months ended ~~September 30, 2021~~March 31, 2022 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 omitted 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, 2021 included in our Annual Report on Form 10-K.

Significant Accounting Policies

Our significant accounting policies are described in greater detail in Note 1 - “Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2021.

New Accounting Standards

~~No new~~Accounting Standards Issued But Not Yet Adopted

In March 2022, the FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting ~~standards~~guidance for troubled debt restructurings by creditors that have ~~yet been~~ adopted the 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 amendment would become effective for the ~~fiscal year beginning~~Company on July 1, ~~2021.~~2023. Early adoption is permitted. The Company is evaluating the impact of ASU 2022-02 on the Company’s consolidated financial statements, but it does not expect the adoption to have a material impact. The Company will be required to update disclosures around financing receivables and net investment in leases.

Table of Contents

2. ACQUISITIONS

On August 2, 2021 the Company’s subsidiary, Axos Clearing, LLC, acquired certain assets and liabilities of E*TRADE Advisor Services (“EAS”), ~~rebranded Axos Advisor Services (“AAS”),~~ the registered investment advisor custody business of Morgan Stanley. This business was rebranded as Axos Advisor Services (“AAS”). AAS adds incremental fee income, a turnkey technology platform used by independent registered investment advisors for trading and custody services, and low cost deposits that can be used to generate fee income from other bank partners or to fund loan growth at Axos Bank. The ~~initial~~ purchase price of ~~$54.6~~$54.8 million ~~consists~~consisted entirely of cash consideration paid upon acquisition and ~~is pending final~~ working capital adjustments.

The Company incurred acquisition-related costs totaling $0.04 million for the nine months ended March 31, 2022. There were no costs in the three months ~~ended September 30, 2021.~~March 31, 2022. These costs are recognized in general and administrative expenses in the unaudited consolidated statements of income.

The acquisition is accounted for as a business combination under the acquisition method of accounting. Accordingly, tangible and intangible assets acquired (and liabilities assumed) are recorded at their estimated fair values as of the date of acquisition. The Company allocated the purchase price to the tangible and intangible assets acquired based on information available through ~~September 30, 2021.~~March 31, 2022. The ~~Company’s accounting for the acquisition has not been finalized as the Company continues to evaluate the working capital adjustment, which is expected to have an immaterial effect on the value~~estimated fair values of the ~~goodwill recognized. The allocation will be updated, if necessary, through the~~acquired assets and assumed liabilities are subject to refinement as additional information relative to closing date fair values becomes available. Any subsequent measurement period ~~which is~~adjustments to the fair values of acquired assets and liabilities assumed, identifiable intangible assets, or other purchase accounting adjustments will result in adjustments to goodwill no later than ~~one year from~~within the ~~acquisition date.~~first 12 months following the closing date of acquisition.

The preliminary allocation of the $54.6 million purchase price consists of $6.5 million of fair value of tangible assets acquired, $3.4 million of liabilities assumed, $27.1 million of identifiable intangible assets and $24.4 million of goodwill, all of which is expected to be deductible for tax purposes. In December 2021, the Company made a $0.2 million true-up payment based on working capital adjustments, which was recorded as an increase in the purchase price up to $54.8 million with no impact on goodwill or identifiable intangible assets. After the working capital true-up, the fair value of tangible assets acquired is $6.4 million and the fair value of liabilities acquired is $3.1 million. Identifiable intangible assets with a finite useful are amortized on a straight-line basis. Goodwill was calculated as the excess of consideration exchanged over the fair value of identifiable net assets acquired. The goodwill includes synergies expected to result from combining the acquired assets and liabilities with existing operations, coupling its custody platform with the Company existing product offerings and leveraging customer relationships through RIAs. The following table summarizes the fair value and useful life of each intangible asset acquired as of the acquisition date:


($ in thousands)	Fair Value		Useful Lives (Years)
Trade Name	$	290	0.16
Proprietary Technology	10,990		7
Customer Relationships	15,650		14
Non-Compete Agreements	130		1
	$	27,060

The pro forma results of operations and the results of operations since the acquisition date have not been separately disclosed because the effects were not material to the consolidated financial statements.

Table of Contents

3. FAIR VALUE

Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820, Fair Value Measurement, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The following table sets forth the Company’s financial assets and liabilities measured at fair value on a recurring basis at ~~September 30, 2021~~March 31, 2022 and June 30, 2021. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:


		September 30, 2021									March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
ASSETS:	ASSETS:									ASSETS:
Securities—Trading: Municipal	Securities—Trading: Municipal	$	—	$	1,941	$	—	$	1,941	Securities—Trading: Municipal	$	—	$	366	$	—	$	366
Securities—Available-for-Sale:	Securities—Available-for-Sale:									Securities—Available-for-Sale:
Agency Debt1		$	—	$	—	$	—	$	—

Agency MBS1	Agency MBS1	—		24,526		—		24,526		Agency MBS1	—		27,203		—		27,203
Non-Agency MBS2	Non-Agency MBS2	—		—		59,851		59,851		Non-Agency MBS2	—		—		151,479		151,479
Municipal	Municipal	—		3,501		—		3,501		Municipal	—		3,311		—		3,311
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		48,118		—		48,118		Asset-backed securities and structured notes	—		47,517		—		47,517
Total—Securities—Available-for-Sale	Total—Securities—Available-for-Sale	$	—	$	76,145	$	59,851	$	135,996	Total—Securities—Available-for-Sale	$	—	$	78,031	$	151,479	$	229,510
Loans Held for Sale	Loans Held for Sale	$	—	$	33,344	$	—	$	33,344	Loans Held for Sale	$	—	$	19,611	$	—	$	19,611
Mortgage servicing rights	Mortgage servicing rights	$	—	$	—	$	18,438	$	18,438	Mortgage servicing rights	$	—	$	—	$	23,519	$	23,519
Other assets—Derivative instruments	Other assets—Derivative instruments	$	—	$	—	$	2,292	$	2,292	Other assets—Derivative instruments	$	—	$	—	$	2,154	$	2,154
LIABILITIES:	LIABILITIES:									LIABILITIES:
Other liabilities—Derivative instruments	Other liabilities—Derivative instruments	$	—	$	—	$	66	$	66	Other liabilities—Derivative instruments	$	—	$	—	$	1,004	$	1,004

		June 30, 2021									June 30, 2021
(Dollars in thousands)	(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
ASSETS:	ASSETS:									ASSETS:
Securities—Trading: Municipal	Securities—Trading: Municipal	$	—	$	1,983	$	—	$	1,983	Securities—Trading: Municipal	$	—	$	1,983	$	—	$	1,983
Securities—Available-for-Sale:	Securities—Available-for-Sale:									Securities—Available-for-Sale:
Agency Debt1		$	—	$	—	$	—	$	—

Agency MBS1	Agency MBS1	—		23,913		—		23,913		Agency MBS1	—		23,913		—		23,913
Non-Agency MBS2	Non-Agency MBS2	—		—		67,615		67,615		Non-Agency MBS2	—		—		67,615		67,615
Municipal	Municipal	—		3,565		—		3,565		Municipal	—		3,565		—		3,565
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		92,242		—		92,242		Asset-backed securities and structured notes	—		92,242		—		92,242
Total—Securities—Available-for-Sale	Total—Securities—Available-for-Sale	$	—	$	119,720	$	67,615	$	187,335	Total—Securities—Available-for-Sale	$	—	$	119,720	$	67,615	$	187,335
Loans Held for Sale	Loans Held for Sale	$	—	$	29,768	$	—	$	29,768	Loans Held for Sale	$	—	$	29,768	$	—	$	29,768
Mortgage servicing rights	Mortgage servicing rights	$	—	$	—	$	17,911	$	17,911	Mortgage servicing rights	$	—	$	—	$	17,911	$	17,911
Other assets—Derivative instruments	Other assets—Derivative instruments	$	—	$	—	$	2,280	$	2,280	Other assets—Derivative instruments	$	—	$	—	$	2,280	$	2,280
LIABILITIES:	LIABILITIES:									LIABILITIES:
Other liabilities—Derivative instruments	Other liabilities—Derivative instruments	$	—	$	—	$	75	$	75	Other liabilities—Derivative instruments	$	—	$	—	$	75	$	75

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

2Private 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.

910

Table of Contents

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										For the Three Months Ended
		September 30, 2021										March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Securities – Available-for-Sale: Non-Agency MBS		Mortgage Servicing Rights			Derivative Instruments, net		Total		(Dollars in thousands)		Securities – Available-for-Sale: Non-Agency MBS		Mortgage Servicing Rights		Derivative Instruments, net		Total
Opening balance	Opening balance	$	67,615	$	17,911		$	2,205	$	87,731	Opening balance		$	58,752	$	20,110	$	1,377	$	80,239

Total gains or losses for the period:											Total gains or losses for the period:

Included in earnings—Mortgage banking income	Included in earnings—Mortgage banking income	—		(1,185)			21		(1,164)		Included in earnings—Mortgage banking income		—		2,316		(227)		2,089
Included in other comprehensive income	Included in other comprehensive income	(112)		—			—		(112)		Included in other comprehensive income		(1,841)		—		—		(1,841)
Purchases, retentions, issues, sales and settlements:	Purchases, retentions, issues, sales and settlements:										Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	Purchases/Retentions	—		1,712			—		1,712		Purchases/Retentions		95,000		1,093		—		96,093

Settlements	Settlements	(7,652)		—			—		(7,652)		Settlements		(432)		—		—		(432)

Closing balance	Closing balance	$	59,851	$	18,438		$	2,226	$	80,515	Closing balance		$	151,479	$	23,519	$	1,150	$	176,148

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	(1,185)		$	21	$	(1,164)	Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period		$	—	$	2,316	$	(227)	$	2,089

						For the Nine Months Ended
						March 31, 2022
(Dollars in thousands)											(Dollars in thousands)		Securities – Available-for-Sale: Non-Agency RMBS		Mortgage Servicing Rights		Derivative Instruments, net		Total
Opening Balance											Opening Balance		$	67,615	$	17,911	$	2,205	$	87,731

Total gains or losses for the period:											Total gains or losses for the period:

Included in earnings—Mortgage banking income											Included in earnings—Mortgage banking income		—		1,229		(1,055)		174
Included in other comprehensive income											Included in other comprehensive income		(2,480)		—		—		(2,480)
Purchases, retentions, issues, sales and settlements:											Purchases, retentions, issues, sales and settlements:
Purchases/Retentions											Purchases/Retentions		95,000		4,379		—		99,379

Settlements											Settlements		(8,656)		—		—		(8,656)

Closing balance											Closing balance		$	151,479	$	23,519	$	1,150	$	176,148

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period											Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period		$	—	$	1,229	$	(1,055)	$	174

For the Three Months Ended
September 30, 2020
(Dollars in thousands) Securities – Available-for-Sale: Non-Agency MBS Mortgage Servicing Rights Derivative Instruments, net Total
Opening balance $ 18,332 $ 10,675 $ 7,416 $ 36,423
Included in earnings—Mortgage banking income — (1,795) 5,583 3,788
Included in other comprehensive income (323) — — (323)
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions — 3,250 — 3,250
Settlements (397) — — (397)
Closing balance $ 17,612 $ 12,130 $ 12,999 $ 42,741
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period $ — $ (1,795) $ 5,583 $ 3,788

Table of Contents


	For the Three Months Ended
	March 31, 2021
(Dollars in thousands)	Securities – Available-for-Sale: Non-Agency MBS		Mortgage Servicing Rights		Derivative Instruments, net		Total

Opening balance	$	17,135	$	14,314	$	7,979	$	39,428


Total gains or losses for the period:


Included in earnings—Mortgage banking income	—		(1,221)		(1,151)		(2,372)
Included in other comprehensive income	913		—		—		913
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	—		3,538		—		3,538


Settlements	(671)		—		—		(671)

Closing balance	$	17,377	$	16,631	$	6,828	$	40,836

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	(1,221)	$	(1,151)	$	(2,372)

	For the Nine Months Ended
	March 31, 2021
(Dollars in thousands)	Securities – Available-for-Sale: Non-Agency RMBS		Mortgage Servicing Rights		Derivative Instruments, net		Total
Opening Balance	$	18,332	$	10,675	$	7,416	$	36,423


Total gains or losses for the period:


Included in earnings—Mortgage banking income	—		(5,266)		(588)		(5,854)
Included in other comprehensive income	607		—		—		607
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	—		11,222		—		11,222


Settlements	(1,562)		—		—		(1,562)

Closing balance	$	17,377	$	16,631	$	6,828	$	40,836

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	(5,266)	$	(588)	$	(5,854)

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

~~September 30, 2021~~March 31, 2022

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Securities – Non-agency MBS

~~59,851~~151,479

Discounted Cash Flow

Projected Constant Prepayment Rate,
Projected Constant Default Rate,
Projected Loss Severity,
Discount Rate over LIBOR

0.0 to ~~33.9% (2.3%~~30.0% (19.3%)

0.0 to ~~4.7% (0.4%~~6.7% (2.0%)

0.0 to 68.3% ~~(9.4%~~(24.9%)

2.7 to ~~6.3% (3.0%~~6.5% (2.8%)

Mortgage Servicing Rights

~~18,438~~23,519

Discounted Cash Flow

Projected Constant Prepayment Rate,
Life (in years),
Discount Rate

~~6.9~~9.8 to ~~37.2% (11.2%~~51.0% (13.4%)

~~1.6~~1.4 to ~~7.7 (6.5)~~8.6 (7.2)

9.5 to ~~14.0% (9.6%~~11.3% (9.5%)

Derivative Instruments

~~2,226~~1,150

Sales Comparison Approach

Projected Sales Profit of Underlying Loans

~~0.2~~(1.0) to ~~0.9% (0.5%~~0.2% ((0.2)%)

June 30, 2021

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Securities – Non-agency MBS

67,615

Discounted Cash Flow

Projected Constant Prepayment Rate,
Projected Constant Default Rate,
Projected Loss Severity,
Discount Rate over LIBOR

0.0 to 25.0% (2.7%)

0.0 to 5.6% (0.6%)

0.0 to 100.0% (19.4%)

2.7 to 7.2% (3.1%)

Mortgage Servicing Rights

17,911

Discounted Cash Flow

Projected Constant Prepayment Rate,
Life (in years),
Discount Rate

7.5 to 37.4% (11.5%)

1.7 to 7.5 (6.4)

9.5 to 13.0% (9.6%)

Derivative Instruments

2,205

Sales Comparison Approach

Projected Sales Profit of Underlying Loans

0.2 to 0.5% (0.3%)

1012

Table of Contents

The significant unobservable inputs used in the fair value measurement of the Company’s residential mortgage-backed securities are projected prepayment rates, probability of default, and projected loss severity in the event of default. 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.

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


		September 30, 2021									March 31, 2022
(Dollars in thousands)	(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		(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 foreclosed assets:	Other real estate owned and foreclosed assets:									Other real estate owned and foreclosed assets:
Single family real estate		$	—	$	—	$	6,114	$	6,114

Autos and RVs	Autos and RVs	—		—		206		206		Autos and RVs	$	—	$	—	$	564	$	564
Total	Total	$	—	$	—	$	6,320	$	6,320	Total	$	—	$	—	$	564	$	564

		June 30, 2021									June 30, 2021
(Dollars in thousands)	(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		(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 foreclosed assets:	Other real estate owned and foreclosed assets:									Other real estate owned and foreclosed assets:

Single family real estate	Single family real estate	$	—	$	—	$	6,547	$	6,547	Single family real estate	$	—	$	—	$	6,547	$	6,547

Autos and RVs	Autos and RVs	—		—		235		235		Autos and RVs	—		—		235		235
Total	Total	$	—	$	—	$	6,782	$	6,782	Total	$	—	$	—	$	6,782	$	6,782

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 ~~$6,320~~$564 after charge-offs of ~~$12~~$79 for the ~~three~~nine months ended ~~September 30, 2021.~~March 31, 2022.

The Company has elected the fair value option for Agency loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on ~~loans held for investment.~~loans. None of these loans are 90 days or more past due nor on nonaccrual as of ~~September 30, 2021~~March 31, 2022 and June 30, 2021.

As of ~~September 30, 2021~~March 31, 2022 and June 30, 2021, the aggregate fair value of loans held for sale, carried at fair value, contractual balance (including accrued interest), and unrealized gain (loss) was as follows:


(Dollars in thousands)	(Dollars in thousands)	September 30, 2021		June 30, 2021		(Dollars in thousands)	March 31, 2022		June 30, 2021
Aggregate fair value	Aggregate fair value	$	33,344	$	29,768	Aggregate fair value	$	19,611	$	29,768
Contractual balance	Contractual balance	32,494		28,940		Contractual balance	19,749		28,940
Unrealized gain		$	850	$	828
Unrealized gain (loss)						Unrealized gain (loss)	$	(138)	$	828

The total amount of gains and losses from changes in fair value included in earnings for the period indicated below for loans held for sale were:


		For the Three Months Ended				For the Three Months Ended				For the Nine Months Ended
		September 30,				March 31,				March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020			(Dollars in thousands)	2022		2021		2022		2021
Interest income	Interest income	$	200	$	382		Interest income	$	204	$	387	$	598	$	1,189
Change in fair value	Change in fair value	43		6,885			Change in fair value	(1,041)		(1,829)		(2,019)		(1,369)
Total	Total	$	243	$	7,267		Total	$	(837)	$	(1,442)	$	(1,421)	$	(180)

1113

Table of Contents

The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at the periods indicated:

~~September 30, 2021~~March 31, 2022

(Dollars in thousands)

Fair Value

Valuation Technique(s)

Unobservable Input

Range (Weighted Average) 1

Other real estate owned and foreclosed assets:

~~Single family real estate~~

~~6,114~~

~~Sales comparison approach~~

~~Adjustment for differences between the comparable sales~~

~~(3.8) to 0.9% (0.1%)~~

Autos and RVs

~~206~~564

Sales comparison approach

Adjustment for differences between the comparable sales

~~1.5~~(10.6) to ~~21.5% (1.5%~~15.5% ((2.7)%)

June 30, 2021

(Dollars in thousands)

Fair Value

Valuation Technique(s)

Unobservable Input

Range (Weighted Average) 1

Other real estate owned and foreclosed assets:

Single family real estate

6,547

Sales comparison approach

Adjustment for differences between the comparable sales

(1.5) to 6.1% (2.0%)

Autos and RVs

235

Sales comparison approach

Adjustment for differences between the comparable sales

(2.1) to 14.7% (2.1%)

1 For other real estate owned and foreclosed assets 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 property being valued having limited comparable sales with similar characteristics at the time the current appraisal is conducted.

1214

Table of Contents

Fair value of Financial Instruments

The carrying amounts and estimated fair values of financial instruments at ~~September 30, 2021~~March 31, 2022 and June 30, 2021 were as follows:


		September 30, 2021											March 31, 2022
				Fair Value											Fair Value
(Dollars in thousands)	(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value		(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:	Financial assets:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,269,434	$	1,269,434	$	—	$	—	$	1,269,434	Cash and cash equivalents	$	1,249,314	$	1,249,314	$	—	$	—	$	1,249,314
Securities — trading	Securities — trading	1,941		—		1,941		—		1,941		Securities — trading	366		—		366		—		366
Securities — available-for-sale	Securities — available-for-sale	135,996		—		76,145		59,851		135,996		Securities — available-for-sale	229,510		—		78,031		151,479		229,510

Loans held for sale, at fair value	Loans held for sale, at fair value	33,344		—		33,344		—		33,344		Loans held for sale, at fair value	19,611		—		19,611		—		19,611
Loans held for sale, at lower of cost or fair value	Loans held for sale, at lower of cost or fair value	11,949		—		—		12,041		12,041		Loans held for sale, at lower of cost or fair value	11,182		—		—		11,255		11,255
Loans held for investment—net	Loans held for investment—net	11,879,021		—		—		12,252,262		12,252,262		Loans held for investment—net	13,093,603		—		—		13,149,215		13,149,215
Securities borrowed	Securities borrowed	457,282		—		—		457,282		457,282		Securities borrowed	274,644		—		—		263,274		263,274
Customer, broker-dealer and clearing receivables	Customer, broker-dealer and clearing receivables	427,169		—		—		427,297		427,297		Customer, broker-dealer and clearing receivables	510,561		—		—		502,086		502,086

Mortgage servicing rights	Mortgage servicing rights	18,438		—		—		18,438		18,438		Mortgage servicing rights	23,519		—		—		23,519		23,519
Financial liabilities:	Financial liabilities:											Financial liabilities:
Total deposits	Total deposits	11,747,442		—		11,191,110		—		11,191,110		Total deposits	12,733,002		—		11,750,900		—		11,750,900

Advances from the Federal Home Loan Bank	Advances from the Federal Home Loan Bank	157,500		—		157,500		—		157,500		Advances from the Federal Home Loan Bank	152,500		—		151,017		—		151,017
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	255,896		—		251,279		—		251,279		Borrowings, subordinated notes and debentures	381,682		—		358,541		—		358,541
Securities loaned	Securities loaned	539,505		—		—		541,339		541,339		Securities loaned	447,748		—		—		449,181		449,181
Customer, broker-dealer and clearing payables	Customer, broker-dealer and clearing payables	510,040		—		—		510,040		510,040		Customer, broker-dealer and clearing payables	543,905		—		—		532,854		532,854


	June 30, 2021
			Fair Value
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:
Cash and cash equivalents	$	1,037,777	$	1,037,777	$	—	$	—	$	1,037,777
Securities — trading	1,983		—		1,983		—		1,983
Securities — available-for-sale	187,335		—		119,720		67,615		187,335


Loans held for sale, at fair value	29,768		—		29,768		—		29,768
Loans held for sale, at lower of cost or fair value	12,294		—		—		12,336		12,336
Loans held for investment—net	11,414,814		—		—		11,833,102		11,833,102
Securities borrowed	619,088		—		—		619,274		619,274
Customer, broker-dealer and clearing receivables	369,815		—		—		369,815		369,815

Mortgage servicing rights	17,911		—		—		17,911		17,911
Financial liabilities:
Total deposits	10,815,797		—		10,297,450		—		10,297,450

Advances from the Federal Home Loan Bank	353,500		—		353,500		—		353,500
Borrowings, subordinated notes and debentures	221,358		—		210,196		—		210,196
Securities loaned	728,988		—		—		731,467		731,467
Customer, broker-dealer and clearing payables	535,425		—		—		535,425		535,425

1315

Table of Contents

The methods and assumptions, not previously presented, used to estimate fair value are described as follows: Carrying amount is the estimated fair value for cash and cash equivalents, 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 and loans held for sale can be found in Note 3 – “Fair Value” of our Form 10-K for the year ended June 30, 2021. The carrying amount of stock of regulatory agencies approximates the estimated fair value of this investment. The fair value of off-balance sheet items is not considered material.

4. SECURITIES

The amortized cost, carrying amount and fair value for the trading and available-for-sale securities at ~~September 30, 2021~~March 31, 2022 and June 30, 2021 were:


		September 30, 2021										March 31, 2022
		Trading		Available-for-sale									Trading	Available-for-sale
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value					(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (MBS):	Mortgage-backed securities (MBS):														Mortgage-backed securities (MBS):
U.S. agencies1	U.S. agencies1	$	—	$	24,362	$	356	$	(192)	$	24,526				U.S. agencies1	$	—	$	28,853	$	43	$	(1,693)	$	27,203
Non-agency2	Non-agency2	—		57,522		2,718		(389)		59,851					Non-agency2	—		151,517		1,423		(1,461)		151,479
Total mortgage-backed securities	Total mortgage-backed securities	—		81,884		3,074		(581)		84,377					Total mortgage-backed securities	—		180,370		1,466		(3,154)		178,682
Non-MBS:	Non-MBS:														Non-MBS:

Municipal	Municipal	1,941		3,437		64		—		3,501					Municipal	366		3,498		—		(187)		3,311
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		46,889		1,229		—		48,118					Asset-backed securities and structured notes	—		46,993		524		—		47,517
Total Non-MBS	Total Non-MBS	1,941		50,326		1,293		—		51,619					Total Non-MBS	366		50,491		524		(187)		50,828
Total debt securities	Total debt securities	$	1,941	$	132,210	$	4,367	$	(581)	$	135,996				Total debt securities	$	366	$	230,861	$	1,990	$	(3,341)	$	229,510

		June 30, 2021										June 30, 2021
		Trading		Available-for-sale									Trading	Available-for-sale
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value					(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (MBS):	Mortgage-backed securities (MBS):														Mortgage-backed securities (MBS):
U.S. agencies1	U.S. agencies1	$	—	$	23,639	$	420	$	(146)	$	23,913				U.S. agencies1	$	—	$	23,639	$	420	$	(146)	$	23,913
Non-agency2	Non-agency2	—		65,174		2,862		(421)		67,615					Non-agency2	—		65,174		2,862		(421)		67,615
Total mortgage-backed securities	Total mortgage-backed securities	—		88,813		3,282		(567)		91,528					Total mortgage-backed securities	—		88,813		3,282		(567)		91,528
Non-MBS:	Non-MBS:														Non-MBS:

Municipal	Municipal	1,983		3,466		99		—		3,565					Municipal	1,983		3,466		99		—		3,565
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		90,549		1,693		—		92,242					Asset-backed securities and structured notes	—		90,549		1,693		—		92,242
Total Non-MBS	Total Non-MBS	1,983		94,015		1,792		—		95,807					Total Non-MBS	1,983		94,015		1,792		—		95,807
Total debt securities	Total debt securities	$	1,983	$	182,828	$	5,074	$	(567)	$	187,335				Total debt securities	$	1,983	$	182,828	$	5,074	$	(567)	$	187,335

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

The Company’s non-agency MBS available-for-sale portfolio with a total fair value of ~~$59,851~~$151,479 at ~~September 30, 2021~~March 31, 2022 consists of 1416 different issues of super senior securities.

The face amounts of debt securities available-for-sale that were pledged to secure borrowings at ~~September 30, 2021~~March 31, 2022 and June 30, 2021 were ~~$1.3~~$1.2 million and $1.4 million, respectively.

1416

Table of Contents

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


		September 30, 2021												March 31, 2022
		Available-for-sale securities in loss position for													Available-for-sale securities in loss position for
		Less Than 12 Months				More Than 12 Months				Total						Less Than 12 Months			More Than 12 Months						Total
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses								(Dollars in thousands)		Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
MBS:	MBS:																			MBS:
U.S. agencies	U.S. agencies	$	11,127	$	(192)	$	—	$	—	$	11,127	$	(192)							U.S. agencies		$	19,641		$	(1,192)		$	5,167		$	(501)		$	24,808	$	(1,693)
Non-agency	Non-agency	—		—		5,676		(389)		5,676		(389)								Non-agency		43,916			(1,085)			5,040			(376)			48,956		(1,461)
Total MBS	Total MBS	11,127		(192)		5,676		(389)		16,803		(581)								Total MBS		63,557			(2,277)			10,207			(877)			73,764		(3,154)
Non-MBS:	Non-MBS:																			Non-MBS:
U.S. agencies		—		—		—		—		—		—

Municipal debt																	Municipal debt	3,311			(187)			—			—			3,311			(187)
Asset-backed securities and structured notes																	Asset-backed securities and structured notes	—			—			—			—			—			—
Total Non-MBS	Total Non-MBS	—		—		—		—		—		—								Total Non-MBS		3,311			(187)			—			—			3,311		(187)
Total debt securities	Total debt securities	$	11,127	$	(192)	$	5,676	$	(389)	$	16,803	$	(581)							Total debt securities		$	66,868		$	(2,464)		$	10,207		$	(877)		$	77,075	$	(3,341)

		June 30, 2021												June 30, 2021
		Available-for-sale securities in loss position for													Available-for-sale securities in loss position for
		Less Than 12 Months				More Than 12 Months				Total						Less Than 12 Months			More Than 12 Months						Total
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses								(Dollars in thousands)		Fair Value			Gross Unrealized Losses			Fair Value			Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
MBS:	MBS:																			MBS:
U.S. agencies	U.S. agencies	$	10,001	$	(146)	$	—	$	—	$	10,001	$	(146)							U.S. agencies		$	10,001		$	(146)		$	—		$	—		$	10,001	$	(146)
Non-agency	Non-agency	—		—		6,018		(421)		6,018		(421)								Non-agency		—			—			6,018			(421)			6,018		(421)
Total MBS	Total MBS	10,001		(146)		6,018		(421)		16,019		(567)								Total MBS		10,001			(146)			6,018			(421)			16,019		(567)
Non-MBS:	Non-MBS:																			Non-MBS:

Municipal debt	Municipal debt	—		—		—		—		—		—								Municipal debt		—			—			—			—			—		—
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		—		—		—		—		—								Asset-backed securities and structured notes		—			—			—			—			—		—
Total Non-MBS	Total Non-MBS	—		—		—		—		—		—								Total Non-MBS		—			—			—			—			—		—
Total debt securities	Total debt securities	$	10,001	$	(146)	$	6,018	$	(421)	$	16,019	$	(567)							Total debt securities		$	10,001		$	(146)		$	6,018		$	(421)		$	16,019	$	(567)

On ~~September 30, 2021,~~March 31, 2022, there were 712 securities in a continuous loss position for a period of more than 12 months, and 918 securities in a continuous loss position for a period of less than 12 months. At June 30, 2021, there were 7 securities in a continuous loss position for a period of more than 12 months, and 7 securities in a continuous loss position for a period of less than 12 months.

At ~~September 30, 2021,~~March 31, 2022, 1 non-agency RMBS with a total carrying amount of ~~$2.8~~$2.4 million was determined to have cumulative credit losses of $0.8 million of which none was recognized in earnings during the three months ended ~~September 30, 2021.~~March 31, 2022.

During the ~~three~~nine months ended ~~September 30, 2020,~~March 31, 2021, the company sold no available-for-sale securities. During the ~~three~~nine months ended ~~September 30, 2021,~~March 31, 2022, the company sold no available-for-sale securities.

The Company had recorded unrealized gains and unrealized losses in accumulated other comprehensive loss as follows:

(Dollars in thousands) September 30,
2021 June 30,
2021
Available-for-sale debt securities—net unrealized gains (losses) $ 3,786 $ 4,507
Available-for-sale debt securities—non-credit related losses (845) (845)
Subtotal 2,941 3,662
Tax benefit (expense) (941) (1,155)
Net unrealized gain (loss) on investment securities in accumulated other comprehensive income (loss) $ 2,000 $ 2,507


(Dollars in thousands)	March 31, 2022		June 30, 2021
Available-for-sale debt securities—net unrealized gains (losses)	$	(1,351)	$	4,507
Available-for-sale debt securities—non-credit related losses	(845)		(845)

Subtotal	(2,196)		3,662
Tax benefit (expense)	570		(1,155)
Net unrealized gain (loss) on investment securities in accumulated other comprehensive income (loss)	$	(1,626)	$	2,507

1517

Table of Contents

5. LOANS & ALLOWANCE FOR CREDIT LOSSES

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


(Dollars in thousands)	(Dollars in thousands)	September 30, 2021		June 30, 2021		(Dollars in thousands)	March 31, 2022		June 30, 2021
Single Family - Mortgage & Warehouse	Single Family - Mortgage & Warehouse	$	4,341,174	$	4,359,472	Single Family - Mortgage & Warehouse	$	3,972,103	$	4,359,472
Multifamily and Commercial Mortgage	Multifamily and Commercial Mortgage	2,458,200		2,470,454		Multifamily and Commercial Mortgage	2,662,517		2,470,454
Commercial Real Estate	Commercial Real Estate	3,492,926		3,180,453		Commercial Real Estate	4,293,032		3,180,453
Commercial & Industrial - Non-RE	Commercial & Industrial - Non-RE	1,239,354		1,123,869		Commercial & Industrial - Non-RE	1,780,545		1,123,869
Auto & Consumer	Auto & Consumer	446,656		362,180		Auto & Consumer	521,936		362,180
Other	Other	42,672		58,316		Other	16,125		58,316
Total gross loans and leases		12,020,982		11,554,744
Total gross loans						Total gross loans	13,246,258		11,554,744
Allowance for credit losses - loans	Allowance for credit losses - loans	(136,778)		(132,958)		Allowance for credit losses - loans	(143,372)		(132,958)
Unaccreted premiums (discounts) and loan and lease fees		(5,183)		(6,972)
Total net loans and leases		$	11,879,021	$	11,414,814
Unaccreted premiums (discounts) and loan fees						Unaccreted premiums (discounts) and loan fees	(9,283)		(6,972)
Total net loans						Total net loans	$	13,093,603	$	11,414,814

~~Table of Contents~~

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


		For the Three Months Ended September 30, 2021															For the Three Months Ended March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total		(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, 2021		$	26,604	$	13,146	$	57,928	$	28,460	$	6,519	$	301	$	132,958
Balance at January 1, 2022																Balance at January 1, 2022	$	25,580	$	13,628	$	67,581	$	22,716	$	10,921	$	63	$	140,489

Provision for credit losses - loans		(1,351)		36		7,295		(5,646)		3,626		40		4,000
Provision (benefit) for credit losses - loans																Provision (benefit) for credit losses - loans	(3,797)		190		2,248		3,525		2,352		(18)		4,500

Charge-offs	Charge-offs	—		—		—		(322)		(394)		—		(716)		Charge-offs	—		—		—		—		(1,892)		—		(1,892)
Recoveries	Recoveries	76		177		—		27		256		—		536		Recoveries	6		—		—		27		242		—		275
Balance at September 30, 2021		$	25,329	$	13,359	$	65,223	$	22,519	$	10,007	$	341	$	136,778
Balance at March 31, 2022																Balance at March 31, 2022	$	21,789	$	13,818	$	69,829	$	26,268	$	11,623	$	45	$	143,372


		For the Three Months Ended September 30, 2020															For the Three Months Ended March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total		(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, 2020		$	25,901	$	4,718	$	21,052	$	9,954	$	9,461	$	4,721	$	75,807
Effect of Adoption of ASC 326		6,318		7,408		25,893		7,042		610		29		47,300
Balance at January 1, 2021																Balance at January 1, 2021	$	32,727	$	12,889	$	56,715	$	19,129	$	7,413	$	7,520	$	136,393
Provision for credit losses - loans	Provision for credit losses - loans	(2,439)		293		2,253		6,512		(1,087)		6,268		11,800		Provision for credit losses - loans	(2,785)		704		(133)		4,506		317		91		2,700
Charge-offs	Charge-offs	(1,489)		—		—		(213)		(736)		—		(2,438)		Charge-offs	(110)		(177)		(255)		—		(863)		—		(1,405)
Recoveries	Recoveries	16		—		—		—		430		—		446		Recoveries	83		—		—		18		318		—		419
Balance at September 30, 2020		$	28,307	$	12,419	$	49,198	$	23,295	$	8,678	$	11,018	$	132,915
Balance at March 31, 2021																Balance at March 31, 2021	$	29,915	$	13,416	$	56,327	$	23,653	$	7,185	$	7,611	$	138,107


	For the Nine Months Ended March 31, 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, 2021	$	26,604	$	13,146	$	57,928	$	28,460	$	6,519	$	301	$	132,958

Provision (benefit) for credit losses - loans	(4,966)		495		11,901		(1,951)		7,277		(256)		12,500

Charge-offs	0		—		—		(322)		(2,926)		—		(3,248)
Recoveries	151		177		—		81		753		—		1,162
Balance at March 31, 2022	$	21,789	$	13,818	$	69,829	$	26,268	$	11,623	$	45	$	143,372


	For the Nine Months Ended March 31, 2021
(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, 2020	$	25,901	$	4,718	$	21,052	$	9,954	$	9,461	$	4,721	$	75,807
Effect of Adoption of ASC 326	6,318		7,408		25,893		7,042		610		29		47,300
Provision for credit losses - loans	47		1,467		9,637		9,472		(984)		2,861		22,500
Charge-offs	(2,469)		(177)		(255)		(2,833)		(2,819)		—		(8,553)
Recoveries	118		—		—		18		917		—		1,053
Balance at March 31, 2021	$	29,915	$	13,416	$	56,327	$	23,653	$	7,185	$	7,611	$	138,107

Table of Contents

Credit Quality Disclosures. Nonaccrual loans consisted of the following as of the dates indicated:


		As of September 30, 2021								As of March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	With Allowance		With No Allowance		Total			(Dollars in thousands)	With Allowance		With No Allowance		Total
Single Family - Mortgage & Warehouse	Single Family - Mortgage & Warehouse	$	53,000	$	58,257	$	111,257		Single Family - Mortgage & Warehouse	$	52,017	$	61,300	$	113,317
Multifamily and Commercial Mortgage	Multifamily and Commercial Mortgage	—		6,964		6,964			Multifamily and Commercial Mortgage	2,941		6,727		9,668
Commercial Real Estate	Commercial Real Estate	15,539		—		15,539			Commercial Real Estate	—		14,952		14,952
Commercial & Industrial - Non-RE	Commercial & Industrial - Non-RE	—		—		—			Commercial & Industrial - Non-RE	—		—		—
Auto & Consumer	Auto & Consumer	311		63		374			Auto & Consumer	62		383		445
Other	Other	—		—		—			Other	—		372		372
Total nonaccrual loans	Total nonaccrual loans	$	68,850	$	65,284	$	134,134		Total nonaccrual loans	$	55,020	$	83,734	$	138,754
Nonaccrual loans to total loans	Nonaccrual loans to total loans					1.12		%	Nonaccrual loans to total loans					1.05		%

As of September 30, 2020
(Dollars in thousands) With Allowance With No Allowance Total
Single Family - Mortgage & Warehouse $ 76,032 $ 56,894 $ 132,926
Multifamily and Commercial Mortgage 31,001 1,847 32,848
Commercial Real Estate — — —
Commercial & Industrial - Non-RE 5,580 — 5,580
Auto & Consumer 623 131 754
Other — — —
Total nonaccrual loans $ 113,236 $ 58,872 $ 172,108
Nonaccrual loans to total loans 1.56 %

No interest income was recognized on nonaccrual loans in either the three months ended ~~September 30, 2021~~March 31, 2022 or ~~September 30, 2020.~~March 31, 2021. No interest income was recognized on nonaccrual loans in either the nine months ended March 31, 2022 or March 31, 2021.

Approximately ~~0.58%~~0.53% of our nonaccrual loans at ~~September 30, 2021~~March 31, 2022 were considered ~~troubled debt restructurings (“TDRs”),~~TDRs, compared to 0.55% at June 30, 2021. Borrowers that make timely payments after TDRs are considered non-performing for at least six months. Generally, after six months of timely payments, those TDRs are reclassified from the nonaccrual loan category to the performing loan category and any previously deferred interest income is recognized. Approximately ~~82.94%~~81.67% of the Bank’s nonaccrual loans are single family first mortgages.

~~Table of Contents~~

The following tables present the outstanding unpaid balance of loans that are performing and nonaccrual by portfolio class:


		September 30, 2021															March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total		(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	Performing	$	4,229,917	$	2,451,236	$	3,477,387	$	1,239,354	$	446,282	$	42,672	$	11,886,848	Performing	$	3,858,786	$	2,652,850	$	4,278,080	$	1,780,545	$	521,490	$	15,753	$	13,107,504
Nonaccrual	Nonaccrual	111,257		6,964		15,539		—		374		—		134,134		Nonaccrual	113,317		9,667		14,952		—		446		372		138,754
Total	Total	$	4,341,174	$	2,458,200	$	3,492,926	$	1,239,354	$	446,656	$	42,672	$	12,020,982	Total	$	3,972,103	$	2,662,517	$	4,293,032	$	1,780,545	$	521,936	$	16,125	$	13,246,258


	June 30, 2021
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	$	4,253,764	$	2,450,026	$	3,164,614	$	1,120,927	$	361,902	$	58,316	$	11,409,549
Nonaccrual	105,708		20,428		15,839		2,942		278		—		145,195
Total	$	4,359,472	$	2,470,454	$	3,180,453	$	1,123,869	$	362,180	$	58,316	$	11,554,744

From time to time, the Company modifies loan terms temporarily for borrowers who are experiencing financial stress. These loans are performing and accruing and will generally return to the original loan terms after the modification term expires. The Company had no TDRs classified as performing loans at ~~September 30, 2021~~March 31, 2022 or June 30, 2021.

~~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, among other factors. 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, less cost to acquire and sell, of any underlying collateral in a timely manner.

~~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.

1819

Table of Contents

Credit Quality Indicators

The amortized cost basis by fiscal year of origination and credit quality indicator of the Company’s ~~loans~~loan as of ~~September 30, 2021~~March 31, 2022 was as follows:


		Loans Held for Investment Origination Year												Revolving Loans						Total			Loans Held for Investment Origination Year																										Revolving Loans					Total
(Dollars in thousands)	(Dollars in thousands)	2022		2021		2020		2019		2018		Prior				Total	(Dollars in thousands)	2022	2021					2020				2019				2018				Prior				Revolving Loans								Total
Single Family-Mortgage & Warehouse	Single Family-Mortgage & Warehouse																							Single Family-Mortgage & Warehouse
Pass	Pass	426,455		864,201		600,147		437,648		398,728		818,420		636,138							4,181,737		Pass		$	1,031,670			$	636,313			$	477,841			$	339,895				$	308,360				$			609,187		$	422,833				$	3,826,099
Special Mention	Special Mention	—		79		2,321		4,020		1,934		6,452		19,678						34,484		Special Mention	—				—				5,625				2,515				5,470					13,111					—					26,721
Substandard	Substandard	—		962		31,726		21,071		18,766		52,428		—						124,953		Substandard	—				1,181				34,805				19,253				14,723					49,321					—					119,283
Doubtful	Doubtful	—		—		—		—		—		—		—						—		Doubtful	—				—				—				—				—					—					—					—
Total	Total	426,455		865,242		634,194		462,739		419,428		877,300		655,816						4,341,174		Total	1,031,670				637,494				518,271				361,663				328,553					671,619					422,833					3,972,103
Multifamily and Commercial Mortgage	Multifamily and Commercial Mortgage																					Multifamily and Commercial Mortgage
Pass	Pass	125,467		632,033		539,154		339,602		274,135		460,901		—						2,371,292		Pass	622,539				584,536				465,708				302,877				236,822					365,615					—					2,578,097
Special Mention	Special Mention	—		—		3,408		17,787		849		2,517		—						24,561		Special Mention	—				—				1,462				—				667					1,391					—					3,520
Substandard	Substandard	—		4,934		29,378		3,518		10,459		14,058		—						62,347		Substandard	—				5,814				34,780				9,566				12,601					18,139					—					80,900
Doubtful	Doubtful	—		—		—		—		—		—		—						—		Doubtful	—				—				—				—				—					—					—					—
Total	Total	125,467		636,967		571,940		360,907		285,443		477,476		—						2,458,200		Total	622,539				590,350				501,950				312,443				250,090					385,145					—					2,662,517
Commercial Real Estate	Commercial Real Estate																					Commercial Real Estate
Pass	Pass	543,531		1,237,401		823,096		446,460		81,563		—		232,244						3,364,295		Pass	1,707,928				1,070,879				469,277				298,783				39,156					—					511,527					4,097,550
Special Mention	Special Mention	—		—		70,664		15,487		—		—		—						86,151		Special Mention	—				—				12,138				16,628				15,000					—					—					43,766
Substandard	Substandard	—		—		24,843		—		15,539		—		2,098						42,480		Substandard	—				—				88,337				16,380				45,701					—					1,298					151,716
Doubtful	Doubtful	—		—		—		—		—		—		—						—		Doubtful	—				—				—				—				—					—					—					—
Total	Total	543,531		1,237,401		918,603		461,947		97,102		—		234,342						3,492,926		Total	1,707,928				1,070,879				569,752				331,791				99,857					—					512,825					4,293,032
Commercial & Industrial - Non-RE	Commercial & Industrial - Non-RE																					Commercial & Industrial - Non-RE
Pass	Pass	38,438		44,235		81,009		15,678		20,553		5,251		1,018,136						1,223,300		Pass	269,404				35,182				76,610				13,316				12,641					152					1,331,399					1,738,704
Special Mention	Special Mention	—		—		—		243		1,002		—		—						1,245		Special Mention	—				—				—				206				810					—					28,037					29,053
Substandard	Substandard	—		2,989		11,717		—		103		—		—						14,809		Substandard	2,988				—				9,800				—				—					—					—					12,788
Doubtful	Doubtful	—		—		—		—		—		—		—						—		Doubtful	—				—				—				—				—					—					—					—
Total	Total	38,438		47,224		92,726		15,921		21,658		5,251		1,018,136						1,239,354		Total	272,392				35,182				86,410				13,522				13,451					152					1,359,436					1,780,545
Auto & Consumer	Auto & Consumer																					Auto & Consumer
Pass	Pass	116,492		153,678		68,587		60,356		27,664		18,760		—						445,537		Pass	274,134				121,317				50,315				43,816				19,404					11,532					—					520,518
Special Mention	Special Mention	—		79		62		49		30		—		—						220		Special Mention	49				345				85				7				19					35					—					540
Substandard	Substandard	23		125		291		371		68		21		—						899		Substandard	213				121				211				255				62					16					—					878
Doubtful	Doubtful	—		—		—		—		—		—		—						—		Doubtful	—				—				—				—				—					—					—					—
Total	Total	116,515		153,882		68,940		60,776		27,762		18,781		—						446,656		Total	274,396				121,783				50,611				44,078				19,485					11,583					—					521,936
Other	Other																					Other
Pass	Pass	2,088		13,121		24,422		—		1,588		1,453		—						42,672		Pass	2,621				10,253				617				—				1,179					1,028					—					15,698
Special Mention	Special Mention	—		—		—		—		—		—		—						—		Special Mention	—				—				21				—				—					34					—					55
Substandard	Substandard	—		—		—		—		—		—		—						—		Substandard	—				—				55				—				317					—					—					372
Doubtful	Doubtful	—		—		—		—		—		—		—						—		Doubtful	—				—				—				—				—					—					—					—
Total	Total	2,088		13,121		24,422		—		1,588		1,453		—						42,672		Total	2,621				10,253				693				—				1,496					1,062					—					16,125
Total	Total																					Total
Pass	Pass	1,252,471		2,944,669		2,136,415		1,299,744		804,231		1,304,785		1,886,518						11,628,833		Pass	3,908,296				2,458,480				1,540,368				998,687				617,562					987,514					2,265,759					12,776,666
Special Mention	Special Mention	—		158		76,455		37,586		3,815		8,969		19,678						146,661		Special Mention	49				345				19,331				19,356				21,966					14,571					28,037					103,655
Substandard	Substandard	23		9,010		97,955		24,960		44,935		66,507		2,098						245,488		Substandard	3,201				7,116				167,988				45,454				73,404					67,476					1,298					365,937
Doubtful	Doubtful	—		—		—		—		—		—		—						—		Doubtful	—				—				—				—				—					—					—					—
Total	Total	1,252,494		2,953,837		2,310,825		1,362,290		852,981		1,380,261		1,908,294						12,020,982		Total	$	3,911,546			$	2,465,941			$	1,727,687			$	1,063,497			$		712,932				$	1,069,561				$	2,295,094				$	13,246,258
As a % of total gross loans	As a % of total gross loans	10.42	%	24.57	%	19.22	%	11.33	%	7.10	%	11.48	%	15.87	%					100.0	%	As a % of total gross loans	29.54		%		18.62		%		13.04		%		8.03		%		5.38		%			8.07		%			17.33		%			100.0		%

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

The Company took proactive measures to manage loans that became delinquent during the recent economic downturn as a result of the COVID-19 pandemic. As of ~~September 30, 2021,~~March 31, 2022, no loans were on forbearance status for forbearance granted ~~from any prior date.~~out of COVID-19. Any forbearance granted out of COVID-19 was for six months or less. ~~Additionally, no forbearance or deferral of payment obligation was granted to any borrower during the three months ended September 30, 2021.~~

1920

Table of Contents

The following tables provide the outstanding unpaid balance of loans that are past due 30 days or more by portfolio class as of the dates indicated:


		September 30, 2021													March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	30-59 Days Past Due			60-89 Days Past Due			90+ Days Past Due			Total			(Dollars in thousands)	30-59 Days Past Due			60-89 Days Past Due			90+ Days Past Due			Total
Single Family-Mortgage & Warehouse	Single Family-Mortgage & Warehouse	$	34,876		$	7,480		$	96,850		$	139,206		Single Family-Mortgage & Warehouse	$	19,537		$	8,579		$	110,099		$	138,215
Multifamily and Commercial Mortgage	Multifamily and Commercial Mortgage	8,071			2,567			1,055			11,693			Multifamily and Commercial Mortgage	8,703			10,254			3,667			22,624
Commercial Real Estate	Commercial Real Estate	3,100			—			—			3,100			Commercial Real Estate	—			58,205			1,141			59,346
Commercial & Industrial - Non-RE	Commercial & Industrial - Non-RE	—			—			—			—			Commercial & Industrial - Non-RE	—			80			—			80
Auto & Consumer	Auto & Consumer	1,841			363			241			2,445			Auto & Consumer	3,558			1,158			406			5,122
Other	Other	216			—			—			216			Other	147			55			363			565
Total	Total	$	48,104		$	10,410		$	98,146		$	156,660		Total	$	31,945		$	78,331		$	115,676		$	225,952
As a % of total gross loans	As a % of total gross loans	0.40		%	0.09		%	0.82		%	1.30		%	As a % of total gross loans	0.24		%	0.59		%	0.87		%	1.71		%


		June 30, 2021									June 30, 2021
(Dollars in thousands)	(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total		(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total
Single Family-Mortgage & Warehouse	Single Family-Mortgage & Warehouse	$	24,150	$	46,552	$	69,169	$	139,871	Single Family-Mortgage & Warehouse	$	24,150	$	46,552	$	69,169	$	139,871
Multifamily and Commercial Mortgage	Multifamily and Commercial Mortgage	7,991		1,816		12,122		21,929		Multifamily and Commercial Mortgage	7,991		1,816		12,122		21,929
Commercial Real Estate	Commercial Real Estate	36,786		—		—		36,786		Commercial Real Estate	36,786		—		—		36,786
Commercial & Industrial - Non-RE	Commercial & Industrial - Non-RE	—		—		2,960		2,960		Commercial & Industrial - Non-RE	—		—		2,960		2,960
Auto & Consumer	Auto & Consumer	601		306		235		1,142		Auto & Consumer	601		306		235		1,142
Other	Other	—		—		—		—		Other	—		—		—		—
Total	Total	$	69,528	$	48,674	$	84,486	$	202,688	Total	$	69,528	$	48,674	$	84,486	$	202,688
As a % of total gross loans		0.60 %		0.42 %		0.73 %		1.75 %
As a % of total gross loans and leases										As a % of total gross loans and leases	0.60 %		0.42 %		0.73 %		1.75 %

Allowance for Credit Losses

The allowance for credit losses is the sum of the allowance for credit losses - loans and the unfunded loan commitment liabilities. Unfunded loan commitment liabilities ~~are~~is included in “Accounts payable, accrued liabilities and other liabilities” in the unaudited Condensed Consolidated Balance Sheets. Provisions for the unfunded loan commitments are included in “General and administrative expenses” in the unaudited Condensed Consolidated Statements of Income.

The following tables present a summary of the activity in the allowance for credit losses for the periods indicated:


		Three Months Ended September 30, 2021							Three Months Ended March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Allowance for Credit Losses - Loans		Unfunded Loan Commitment Liabilities		Total Allowance for Credit Losses		(Dollars in thousands)	Allowance for Credit Losses - Loans		Unfunded Loan Commitment Liabilities		Total Allowance for Credit Losses
Balance at July 1, 2021		$	132,958	$	5,723	$	138,681
Balance at January 1, 2022								Balance at January 1, 2022	$	140,489	$	8,723	$	149,212

Provision for Credit Losses	Provision for Credit Losses	4,000		2,000		6,000		Provision for Credit Losses	4,500		1,000		5,500

Charge-offs	Charge-offs	(716)		—		(716)		Charge-offs	(1,892)		—		(1,892)
Recoveries	Recoveries	536		—		536		Recoveries	275		—		275
Balance at September 30, 2021		$	136,778	$	7,723	$	144,501
Balance at March 31, 2022								Balance at March 31, 2022	$	143,372	$	9,723	$	153,095


		Three Months Ended September 30, 2020							Three Months Ended March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Allowance for Credit Losses - Loans		Unfunded Loan Commitment Liabilities		Total Allowance for Credit Losses		(Dollars in thousands)	Allowance for Credit Losses - Loans		Unfunded Loan Commitment Liabilities		Total Allowance for Credit Losses
Balance at July 1, 2020		$	75,807	$	323	$	76,130
Effect of Adoption of ASC 326		47,300		5,700		53,000
Balance at January 1, 2021								Balance at January 1, 2021	$	136,393	$	5,723	$	142,116
Provision for Credit Losses	Provision for Credit Losses	11,800		700		12,500		Provision for Credit Losses	2,700		—		2,700

Charge-offs	Charge-offs	(2,438)		—		(2,438)		Charge-offs	(1,405)		—		(1,405)
Recoveries	Recoveries	446		—		446		Recoveries	419		—		419
Balance at September 30, 2020		$	132,915	$	6,723	$	139,638
Balance at March 31, 2021								Balance at March 31, 2021	$	138,107	$	5,723	$	143,830

Table of Contents


	For the Nine Months Ended March 31, 2022
(Dollars in thousands)	Allowance for Credit Losses - Loans		Unfunded Loan Commitment Liabilities		Total Allowance for Credit Losses
Balance at July 1, 2021	$	132,958	$	5,723	$	138,681

Provision for Credit Losses	12,500		4,000		16,500

Charge-offs	(3,248)		—		(3,248)
Recoveries	1,162		—		1,162
Balance at March 31, 2022	$	143,372	$	9,723	$	153,095


	For the Nine Months Ended March 31, 2021
(Dollars in thousands)	Allowance for Credit Losses - Loans		Unfunded Loan Commitment Liabilities		Total Allowance for Credit Losses
Balance at July 1, 2020	$	75,807	$	323	$	76,130
Effect of Adoption of ASC 326	47,300		5,700		53,000
Provision for Credit Losses	22,500		(300)		22,200

Charge-offs	(8,553)		—		(8,553)
Recoveries	1,053		—		1,053
Balance at March 31, 2021	$	138,107	$	5,723	$	143,830

6. SUBORDINATED NOTES

In February 2022, the Company completed the sale of $150.0 million aggregate principal amount of its 4.00% Fixed-to-Floating Rate Subordinated Notes (the “Notes”). The Notes are obligations only of Axos Financial, Inc. The Notes mature on March 1, 2032 and accrue interest at a fixed rate per annum equal to 4.00%, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2022. From and including March 1, 2027, to, but excluding March 1, 2032 or the date of early redemption, the Notes will bear interest at a floating rate per annum equal to a benchmark rate of the Three-Month Term SOFR plus a spread of 227 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing on June 1, 2027. The Notes may be redeemed on or after March 1, 2027, which date may be extended at the Company’s discretion, at a redemption price equal to principal plus accrued and unpaid interest, subject to certain conditions. Fees and costs incurred in connection with the debt offering amortize to interest expense over the term of the Notes.

Table of Contents

6.7. EQUITY AND STOCK-BASED COMPENSATION

Amended and Restated 2014 Stock Incentive Plan. On October 21, 2021 the Company’s stockholders approved the Amended and Restated 2014 Stock Incentive Plan, which reserved 1000000 additional shares for purposes of the Company’s equity compensation.

Restricted Stock Units. During the ~~three~~nine months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company granted ~~298,644~~526,699 and ~~435,381~~614,406 restricted stock unit awards (“RSUs”) to employees and directors, and during the ~~three~~nine months ended ~~September 30, 2021~~March 31, 2022 granted 478,353 RSU’s to the chief executive officer, which vest ratably on each of the four fiscal year ends after the issue date. All other RSUs granted during these quarters generally vest over 3 years, one-third on each anniversary date. ~~On October 21, 2021, stockholders approved an additional 1000000 shares for the Company’s equity compensation.~~

The Company’s pre-tax income and net income for the ~~three~~nine months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ include stock award expense of ~~$4.0~~$15.9 million and ~~$4.4~~$15.8 million, with total income tax benefit of ~~$1.2~~$4.6 million and ~~$1.3~~$4.7 million, respectively. The Company recognizes compensation expense based upon the grant-date fair value divided by the vesting and the service period between each vesting date. At ~~September 30, 2021,~~March 31, 2022, unrecognized compensation expense related to non-vested awards aggregated to ~~$37.0~~$43.7 million and is expected to be recognized in future periods as follows:


(Dollars in thousands)	(Dollars in thousands)	Stock Award Compensation Expense		(Dollars in thousands)	Stock Award Compensation Expense
For the fiscal year remainder:	For the fiscal year remainder:			For the fiscal year remainder:
2022	2022	$	14,021	2022	$	5,481
2023	2023	13,740		2023	18,443
2024	2024	7,900		2024	13,142
2025	2025	1,271		2025	5,253
2026	2026	101		2026	989

Thereafter				Thereafter	400
Total	Total	$	37,033	Total	$	43,708

The following table presents the status and changes in restricted stock units for the periods indicated:


		Restricted Stock Units	Weighted-Average Grant-Date Fair Value			Restricted Stock Units	Weighted-Average Grant-Date Fair Value
Non-vested balance at June 30, 2020	Non-vested balance at June 30, 2020	1,445,540	$	28.62	Non-vested balance at June 30, 2020	1,445,540	$	28.62
Granted	Granted	617,833	32.12		Granted	617,833	32.12
Vested	Vested	(666,790)	29.23		Vested	(666,790)	29.23
Forfeited	Forfeited	(176,113)	27.42		Forfeited	(176,113)	27.42
Non-vested balance at June 30, 2021	Non-vested balance at June 30, 2021	1,220,470	$	30.18	Non-vested balance at June 30, 2021	1,220,470	$	30.18
Granted	Granted	776,997	48.50		Granted	1,005,052	48.31
Vested	Vested	(301,296)	28.28		Vested	(503,272)	29.52
Forfeited	Forfeited	(21,423)	32.84		Forfeited	(123,406)	35.58
Non-vested balance at September 30, 2021		1,674,748	$	39.03
Non-vested balance at March 31, 2022					Non-vested balance at March 31, 2022	1,598,844	$	41.41

The total fair value of shares vested for the three and nine months ended ~~September 30, 2021~~March 31, 2022 was ~~$14,485.~~$9,725 and $24,559. The total fair value of shares vested for the three and nine months ended ~~September 30, 2020~~March 31, 2021 was ~~$6,602.~~$8,366 and $16,612.

2123

Table of Contents

7.8. EARNINGS PER COMMON SHARE

Earnings per common share (“EPS”) ~~are~~is presented under two formats: basic EPS and diluted EPS. Basic EPS is computed by dividing the net income attributable to common stock (net income after deducting dividends on preferred stock and preferred stock redemption charge) by the sum of the weighted-average number of common shares outstanding during the year and the unvested average of participating RSUs. Diluted EPS is computed by dividing the sum of net income attributable to common stock and dividends on diluted preferred stock by the sum of the weighted-average number of common shares outstanding during the year and the impact of dilutive potential common shares, such as nonparticipating RSUs, stock options and convertible preferred stock.

The unvested stock-based compensation awards issued under the Amended and Restated 2014 Stock Incentive Plan have no stockholder rights, meaning they are not entitled to dividends and are considered nonparticipating. The Company does not include these nonparticipating RSUs in the basic EPS calculation, but are included in the diluted EPS calculation using the treasury stock method.

The following table presents the calculation of basic and diluted EPS:


		Three Months Ended				Three Months Ended				Nine Months Ended
		September 30,				March 31,				March 31,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2021		2020			(Dollars in thousands, except per share data)	2022		2021		2022		2021
Earnings Per Common Share	Earnings Per Common Share						Earnings Per Common Share
Net income	Net income	$	60,210	$	53,022		Net income	$	61,823	$	53,645	$	182,820	$	161,452
Preferred stock dividends	Preferred stock dividends	—		(77)			Preferred stock dividends	—		—		—		(103)

Preferred stock redemption charge							Preferred stock redemption charge	—		—		—		(87)
Net income attributable to common stockholders	Net income attributable to common stockholders	$	60,210	$	52,945		Net income attributable to common stockholders	$	61,823	$	53,645	$	182,820	$	161,262
Average common shares outstanding	Average common shares outstanding	59,390,846		59,509,320			Average common shares outstanding	59,542,128		59,118,884		59,476,488		59,225,409

Total qualifying shares	Total qualifying shares	59,390,846		59,509,320			Total qualifying shares	59,542,128		59,118,884		59,476,488		59,225,409
Earnings per common share	Earnings per common share	$	1.01	$	0.89		Earnings per common share	$	1.04	$	0.91	$	3.07	$	2.72
Diluted Earnings Per Common Share	Diluted Earnings Per Common Share						Diluted Earnings Per Common Share
Net income attributable to common stockholders	Net income attributable to common stockholders	$	60,210	$	52,945		Net income attributable to common stockholders	$	61,823	$	53,645	$	182,820	$	161,262
Average common shares issued and outstanding	Average common shares issued and outstanding	59,390,846		59,509,320			Average common shares issued and outstanding	59,542,128		59,118,884		59,476,488		59,225,409
Dilutive effect of average unvested RSUs	Dilutive effect of average unvested RSUs	1,253,442		417,464			Dilutive effect of average unvested RSUs	1,069,831		1,363,849		1,128,998		1,227,811
Total dilutive common shares outstanding	Total dilutive common shares outstanding	60,644,288		59,926,784			Total dilutive common shares outstanding	60,611,959		60,482,733		60,605,486		60,453,220
Diluted earnings per common share	Diluted earnings per common share	$	0.99	$	0.88		Diluted earnings per common share	$	1.02	$	0.89	$	3.02	$	2.67

8.9. COMMITMENTS AND CONTINGENCIES

COVID-19 Impact. The Company has closely monitored the rapid developments of and uncertainties caused by the COVID-19 pandemic. In response to the changes in economic and business conditions as a result of the COVID-19 pandemic, the Company continues to take the necessary and appropriate actions to support customers, employees, partners and shareholders.

The Company will continue to monitor uncertainties caused by and developments of COVID-19.

Table of Contents

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, 2021~~March 31, 2022 in the corresponding fiscal years:

~~Table of Contents~~


(Dollars in thousands)	(Dollars in thousands)			(Dollars in thousands)
Remainder of 2022	Remainder of 2022	$	7,464	Remainder of 2022	$	2,498
2023	2023	10,216		2023	10,595
2024	2024	9,849		2024	10,287
2025	2025	9,673		2025	10,119
2026	2026	9,336		2026	9,791
Thereafter	Thereafter	35,894		Thereafter	38,821
Total lease payments	Total lease payments	82,432		Total lease payments	82,111
Less: amount representing interest	Less: amount representing interest	(9,122)		Less: amount representing interest	(8,668)
Total Lease Liability	Total Lease Liability	$	73,310	Total Lease Liability	$	73,443

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, 2021,~~March 31, 2022, the Company had commitments to originate ~~$60.9~~$160.1 million in fixed rate loans and ~~$1,007.7~~$2,660.3 million in variable rate loans, totaling an aggregate outstanding principal balance of ~~$1,068.7~~$2,820.3 million. At ~~September 30, 2021,~~March 31, 2022, the Company’s fixed rate commitments to originate had a weighted-average rate of ~~1.92%~~5.19%. At ~~September 30, 2021,~~March 31, 2022, the Company also had commitments to sell ~~$56.1~~$33.0 million in fixed rate loans and none in variable rate loans, totaling an aggregate outstanding principal balance of ~~$56.1~~$33.0 million.

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.

At March 31, 2022 the Company had a commitment to fund an equity investment measured at fair value of $10 million. At March 31, 2022, no amounts had been funded related to the investment.

In the normal course of business, Axos Clearing’s 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.

~~Table of Contents~~

Litigation. On October 15, 2015, the Company, its Chief Executive Officer and its then Chief Financial Officer were named defendants in a putative class action lawsuit styled Golden v. BofI Holding, Inc., et al, and brought in United States District Court for the Southern District of California (the “Golden Case”). On November 3, 2015, the Company, its Chief Executive Officer and its then Chief Financial Officer were named defendants in a second putative class action lawsuit styled Hazan v. BofI Holding, Inc., et al, and also brought in the United States District Court for the Southern District of California (the “Hazan Case”). On February 1, 2016, the Golden Case and the Hazan Case were consolidated as In re BofI Holding, Inc. Securities Litigation, Case #: 3:15-cv-02324-GPC-KSC (the “Class Action”), and the Houston Municipal Employees Pension System was appointed lead plaintiff. The plaintiffs allege that the Company and other named defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by failing to disclose wrongful conduct that was alleged in a complaint filed in connection with a wrongful termination of employment lawsuit filed on October 13, 2015 (the “Employment Matter”) and that as a result the Company’s statements regarding its internal controls, as well as portions of its financial statements, were false and misleading. On March 21, 2018, the Court entered a final order dismissing the Class Action with prejudice. Subsequently, the plaintiff appealed, the Court overturned the dismissal and the Company is preparing a petition for a rehearing. On April 13, 2022, the parties executed a Stipulation and Agreement of Settlement. The

Table of Contents

Stipulation and Agreement of Settlement was submitted to the District Court for approval on April 15, 2022. There is no assurance that approval will be granted. The agreed to settlement amount is not material to the Condensed Consolidated Financial Statements, as of and for the quarter ended March 31, 2022.

On April 3, 2017, the Company, its Chief Executive Officer and its then Chief Financial Officer were named defendants in a putative class action lawsuit styled Mandalevy v. BofI Holding, Inc., et al, and brought in United States District Court for the Southern District of California (the “Mandalevy Case”). The Mandalevy Case seeks monetary damages and other relief on behalf of a putative class that has not been certified by the Court. The complaint in the Mandalevy Case (the “Mandalevy Complaint”) alleges a class period that differs from that alleged in the First Class Action, and that the Company and other named defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by failing to disclose wrongful conduct that was alleged in a March 2017 media article. The Mandalevy Case has not been consolidated into the First Class Action. On December 7, 2018, the Court entered a final order granting the defendants’ motion and dismissing the Mandalevy Case with prejudice. Subsequently, the plaintiff filed a notice of appeal and the Court took the matter under advisement. On November 3, 2020, the Court issued a ruling affirming in part and reversing in part the District Court's Order dismissing the Class Action Second Amended Complaint. The defendants filed a petition for rehearing en banc on November 17, 2020, which petition was denied on December 16, 2020. The defendants filed a motion to dismiss the remanded complaint on February 19, 2021. On January 31, 2022, a Stipulation of Settlement was submitted to the District Court for approval. There is no assurance that approval will be granted. The agreed to settlement amount is not material to the Condensed Consolidated Financial Statements, as of and for the quarter ended March 31, 2022.

The Company and the other named defendants dispute the allegations of wrongdoing advanced by the plaintiffs in the Class Action, the Mandalevy Case, and in the Employment Matter, as well as those plaintiffs’ statement of the underlying factual circumstances, and are vigorously defending each case.

In addition to the First Class Action and the Mandalevy Case, 2 separate shareholder derivative actions were filed in December, 2015, purportedly on behalf of the Company. The first derivative action, Calcaterra v. Garrabrants, et al, was filed in the United States District Court for the Southern District of California on December 3, 2015. The second derivative action, Dow v. Micheletti, et al, was filed in the San Diego County Superior Court on December 16, 2015. A third derivative action, DeYoung v. Garrabrants, et al, was filed in the United States District Court for the Southern District of California on January 22, 2016, a fourth derivative action, Yong v. Garrabrants, et al, was filed in the United States District Court for the Southern District of California on January 29, 2016, a fifth derivative action, Laborers Pension Trust Fund of Northern Nevada v. Allrich et al, was filed in the United States District Court for the Southern District of California on February 2, 2016, and a sixth derivative action, Garner v. Garrabrants, et al, was filed in the San Diego County Superior Court on August 10, 2017. Each of these 6 derivative actions names the Company as a nominal defendant, and certain of its officers and directors as defendants. Each complaint sets forth allegations of breaches of fiduciary duties, gross mismanagement, abuse of control, and unjust enrichment against the defendant officers and directors. The plaintiffs in these derivative actions seek damages in unspecified amounts on the Company’s behalf from the officer and director defendants, certain corporate governance actions, and an award of their costs and attorney’s fees.

The United States District Court for the Southern District of California ordered the 4 above-referenced derivative actions pending before it to be consolidated and appointed lead counsel in the consolidated action. On June 7, 2018, the Court entered an order granting defendant’s motion for judgment on the pleadings, but giving the plaintiffs limited leave to amend by June 28, 2018. The plaintiffs failed to file an amended complaint, and instead plaintiffs filed on June 28, 2018 a motion to stay the case pending resolution of the securities class action and Employment Matter. On August 10, 2018, defendants filed an opposition to plaintiffs’ motion. On September 11, 2018, the plaintiffs filed a second amended complaint. On October 16, 2018, defendants filed a motion to dismiss the second amended complaint. On October 16, 2018, defendants filed a motion to dismiss the second amended complaint. The Court dismissed the second amended complaint with prejudice on May 23, 2019. Subsequently, the plaintiff filed a notice of appeal and opening brief and the Company filed its answering brief. Oral argument was held September 2, 2020 and the Court took the matter under advisement.

~~Table of Contents~~

The 2 derivative actions pending before the San Diego County Superior Court have been consolidated and have been stayed by agreement of the parties.

In view of the inherent difficulty of predicting the outcome of each legal action, particularly since claimants seek substantial or indeterminate damages, it is not possible to reasonably predict or estimate the eventual loss or range of loss, if any, related to each legal ~~action.~~action, unless otherwise disclosed above.

2526

Table of Contents

9.10. SEGMENT REPORTING

There are no material inter-segment sales or transfers. The ~~operating segments reported below~~accounting policies used by each reportable segment are the ~~segments~~same as those discussed in Note 1 - “Organizations and Summary of Significant Accounting Policies” in our Annual Report on Form 10-K for the ~~Company for which separate financial information is available~~year ended June 30, 2021. All costs, except certain corporate administration costs and ~~for which segment results are evaluated regularly by~~income taxes, have been allocated to the ~~Chief Executive Officer in deciding how~~reportable segments. Therefore, combined amounts agree to ~~allocate resources and in assessing performance. The Company operates through 2 operating segments: Banking Business and Securities Business.~~

The Securities Business segment added the RIA custody business from the certain assets and liabilities acquired from EAS. Refer to Note 2 - “Acquisitions” for further detail on the EAS acquisition. Operating results from the EAS acquisition are included in the unaudited condensed consolidated ~~statements of income from the date of acquisition and reported under the Securities Business segment.~~

totals. In order to reconcile the 2 segments to the unaudited condensed consolidated totals, the Company includes parent-only activities and intercompany eliminations. The following tables present the operating results, goodwill, and assets of the segments:


		Three Months Ended September 30, 2021									For the Three Months Ended March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated		(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	Net interest income	$	142,241	$	6,176	$	(1,775)	$	146,642	Net interest income	$	147,828	$	3,377	$	(1,667)	$	149,538
Provision for credit losses	Provision for credit losses	4,000		—		—		4,000		Provision for credit losses	4,500		—		—		4,500
Non-interest income	Non-interest income	14,828		13,106		(1,232)		26,702		Non-interest income	15,741		15,609		(2,576)		28,774
Non-interest expense	Non-interest expense	62,725		19,273		2,433		84,431		Non-interest expense	65,076		20,242		1,501		86,819
Income before taxes	Income before taxes	$	90,344	$	9	$	(5,440)	$	84,913	Income before taxes	$	93,993	$	(1,256)	$	(5,744)	$	86,993


		Three Months Ended September 30, 2020									For the Three Months Ended March 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated		(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	Net interest income	$	123,008	$	4,894	$	(575)	$	127,327	Net interest income	$	135,096	$	3,847	$	(3,274)	$	135,669
Provision for credit losses	Provision for credit losses	11,800		—		—		11,800		Provision for credit losses	2,700		—		—		2,700
Non-interest income	Non-interest income	30,212		5,784		(141)		35,855		Non-interest income	16,201		8,369		(683)		23,887
Non-interest expense	Non-interest expense	61,217		11,352		2,977		75,546		Non-interest expense	64,040		13,282		3,485		80,807
Income before taxes	Income before taxes	$	80,203	$	(674)	$	(3,693)	$	75,836	Income before taxes	$	84,557	$	(1,066)	$	(7,442)	$	76,049

As of September 30, 2021
(Dollars in thousands) Banking Business Securities Business Corporate/Eliminations Axos Consolidated
Goodwill $ 35,721 $ 59,953 $ — $ 95,674
Total Assets $ 13,471,669 $ 1,357,576 $ 77,505 $ 14,906,750



	For the Nine Months Ended March 31, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	432,328	$	14,059	$	(4,639)	$	441,748
Provision for credit losses	12,500		—		—		12,500
Non-interest income	46,864		45,169		(5,770)		86,263
Non-interest expense	190,250		61,169		5,850		257,269
Income before taxes	$	276,442	$	(1,941)	$	(16,259)	$	258,242

As of June 30, 2021
(Dollars in thousands) Banking Business Securities Business Corporate/Eliminations Axos Consolidated
Goodwill $ 35,721 $ 35,501 $ — $ 71,222
Total Assets $ 12,745,029 $ 1,450,512 $ 70,024 $ 14,265,565



	For the Nine Months Ended March 31, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	390,268	$	13,002	$	(6,182)	$	397,088
Provision for credit losses	22,500		—		—		22,500
Non-interest income	68,708		20,725		(973)		88,460
Non-interest expense	187,733		35,946		8,971		232,650
Income before taxes	$	248,743	$	(2,219)	$	(16,126)	$	230,398

2627

Table of Contents



	As of March 31, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Goodwill	$	35,721	$	59,953	$	—	$	95,674
Total Assets	$	14,768,636	$	1,246,997	$	65,317	$	16,080,950



	As of June 30, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Goodwill	$	35,721	$	35,501	$	—	$	71,222
Total Assets	$	12,745,029	$	1,450,512	$	70,024	$	14,265,565

Table of Contents

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 ~~(the~~(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 Annual Report on Form 10-K for the year ended June 30, 2021, 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 effects on our business of the current novel coronavirus pandemic (“COVID-19”), the Company’s financial prospects and other projections of its performance and asset quality, our ability to continue to grow profitably and increase its business, our ability to continue to diversify lending and deposit franchises, and 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. Forward-looking statements are inherently unreliable and actual results may vary. Factors that could cause actual results to differ from these forward-looking statements include uncertainties surrounding the severity, duration, and effects of the COVID-19 pandemic, our ability to successfully integrate acquisitions and realize the anticipated benefits of the transactions, changes in the interest rate environment, 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, the outcome and effects of ~~pending class action~~ litigation filed against the Company and other risk factors discussed under the heading “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q for the quarter ended ~~September 30, 2021~~March 31, 2022 and in our Annual Report on Form 10-K for the year ended June 30, 2021, which has been filed with the Securities and Exchange Commission. 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, the holding company for Axos Bank (the “Bank”), is a diversified financial services company with approximately ~~$14.9~~$16.1 billion in assets that provides consumer and business banking products through its online, 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, small-to-medium size businesses in target sectors, and automobiles. Our Bank generates fee income from consumer and business products including fees from loans originated for sale and transaction fees earned from processing payment activity. Our securities products and services are offered through Axos Clearing LLC (“Axos Clearing”) and its business division Axos Advisor Services (“AAS”), formerly E*TRADE Advisor Services, and Axos Invest, Inc. (“Axos Invest”), which generate interest and fee income by providing comprehensive securities clearing and custody services to introducing broker-dealers and registered investment advisor correspondents and digital investment advisory services to retail investors, respectively. Axos Financial, Inc.’s common stock is listed on the New York Stock Exchange 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.

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 (“CFPB”).~~Bureau.

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, and Axos Invest LLC is an introducing broker-dealer that is registered with the SEC and FINRA.

2729

Table of Contents

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: Banking Business and Securities Business.

Banking Business. The Banking Business includes a broad range of banking services including online banking, concierge banking, and mortgage, vehicle and unsecured lending through online and telephonic distribution channels to serve the needs of consumer and small businesses nationally. Our deposit products consist of demand, savings, money market and time deposit accounts. In addition, the Banking Business focuses on providing deposit products nationwide to industry verticals (e.g., Title and Escrow), cash management products to a variety of businesses, and commercial & industrial and commercial real estate lending to clients. The Banking Business also 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.

We distribute our loan products through our retail, correspondent and wholesale channels, and the loans we retain are primarily first mortgages secured by single family real property and by multifamily real property as well as commercial & industrial loans to businesses. Our investment securities consist of agency and non-agency mortgage-backed securities, municipal securities and other non-agency debt securities. We believe our flexibility to adjust our asset generation channels has been a competitive advantage allowing us to avoid markets and products where credit fundamentals are poor or risks and rewards are not sufficient to support our required return on equity.

Securities Business. The Securities Business includes the Clearing Broker-Dealer, Registered Investment Advisor custody business, Registered Investment Advisor, and Introducing Broker-Dealer lines of businesses. These lines of business offer products independently to their own customers as well as to Banking Business clients. The products offered by the lines of business in the Securities Business primarily generate net interest income and non-banking service fee income.

Securities services includes fully disclosed clearing services through Axos Clearing to FINRA- and SEC-registered member firms for trade execution and clearance as well as back-office services such as record keeping, trade and performance reporting, accounting, general back-office support, securities and margin lending, reorganization assistance and custody of securities. We provide financing to our brokerage customers for their securities trading activities through margin loans that are collateralized by securities, cash, or other acceptable collateral. Securities lending activities include borrowing and lending securities with other broker-dealers. These activities involve borrowing securities to cover short sales and to complete transactions in which clients have failed to deliver securities by the required settlement date, and lending securities to other broker dealers for similar purposes.

Through the RIA custody business, we provide a proprietary, turnkey technology platform for custody services for our RIA customers. This platform provides fee income and service that complement our securities business products, while also generating low cost core deposits.

Axos Invest includes our digital wealth management business, which provides our retail customers with self-directed trading and investment management services through a comprehensive and flexible technology platform.

Segment results are compiled based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions or in accordance with generally accepted accounting principles.

The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material inter-segment sales or transfers. Certain corporate administration costs and income taxes have not been allocated to the reportable segments. Therefore, in order to reconcile the two segments to the unaudited condensed consolidated totals, we include parent-only activities and intercompany eliminations.

COVID-19 Impact

The Company has closely monitored the rapid developments of and uncertainties caused by the COVID-19 pandemic. In response to the changes in economic and business conditions as a result of the COVID-19 pandemic, the Company continues to take the necessary and appropriate actions to support customers, employees, partners and shareholders.

The Company took proactive measures to manage loans that became delinquent during the economic downturn as a result of the COVID-19 pandemic. As of ~~September 30, 2021,~~March 31, 2022, no loans were on forbearance status for a forbearance granted from any prior date. Any forbearance granted out of COVID-19 was for six months or less.

2830

Table of Contents

The Company will continue to monitor uncertainties caused by and developments of COVID-19.

Mergers and Acquisitions

From time to time we undertake acquisitions or similar transactions consistent with our Company’s operating and growth strategies. On August 2, 2021 Axos Clearing, LLC, acquired certain assets and liabilities of E*TRADE Advisor Services (“EAS”), ~~rebranded Axos Advisors Services (“AAS”),~~ the registered investment advisor custody business of Morgan Stanley. This business was rebranded as Axos Advisors Services (“AAS”). AAS adds incremental fee income, a turnkey technology platform used by independent registered investment advisors for trading and custody services, and low-cost deposits that can be used to generate fee income from other bank partners or to fund loan growth at Axos Bank. The ~~initial~~ purchase price of ~~$54.6~~$54.8 million ~~consists~~consisted entirely of cash consideration paid upon acquisition and ~~is pending final~~ working capital adjustments.

Critical Accounting Policies

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 accounting principles generally accepted in the United States of America. 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 that our estimates and assumptions are reasonable under the circumstances. However, actual results may differ significantly from these estimates and assumptions that could have a material effect on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods.

Our significant accounting policies and practices are described in greater detail in Note 1 - “Summary of Significant Accounting Policies” and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2021.

USE OF NON-GAAP FINANCIAL MEASURES

In addition to the results presented in accordance with GAAP, this report includes the non-GAAP financial measures ~~such as~~ adjusted earnings, adjusted earnings per common share, 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. Although we believe the non-GAAP financial measures disclosed in this report enhance investors’ understanding of our business and performance, 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 earnings per diluted common share (“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 ~~Bank’s~~Company’s operating performance. We believe excluding the non-recurring acquisition related costs, and other costs (unusual or non-recurring charges) provides investors with an alternative understanding of Axos’ business without these non-recurring costs.

2931

Table of Contents

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				Three Months Ended				Nine Months Ended
		September 30,				March 31,				March 31,
(Dollars in thousands, except per share amounts)	(Dollars in thousands, except per share amounts)	2021		2020			(Dollars in thousands, except per share amounts)	2022		2021		2022		2021
Net income	Net income	$	60,210	$	53,022		Net income	$	61,823	$	53,645	$	182,820	$	161,452
Acquisition-related costs	Acquisition-related costs	2,846		2,602			Acquisition-related costs	2,803		2,511		8,676		7,665

Tax effects of adjustments	Tax effects of adjustments	(828)		(783)			Tax effects of adjustments	(811)		(740)		(2,534)		(2,285)
Adjusted earnings (Non-GAAP)	Adjusted earnings (Non-GAAP)	$	62,228	$	54,841		Adjusted earnings (Non-GAAP)	$	63,815	$	55,416	$	188,962	$	166,832

Adjusted EPS (Non-GAAP)	Adjusted EPS (Non-GAAP)	$	1.03	$	0.91		Adjusted EPS (Non-GAAP)	$	1.05	$	0.92	$	3.12	$	2.76

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 mortgage 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,				March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020			(Dollars in thousands)	2022		2021
Total stockholders’ equity		$	1,458,621	$	1,236,965
Less: preferred stock		—		5,063

Common stockholders’ equity	Common stockholders’ equity	1,458,621		1,231,902			Common stockholders’ equity	$	1,585,585	$	1,345,650
Less: mortgage servicing rights, carried at fair value	Less: mortgage servicing rights, carried at fair value	18,438		12,130			Less: mortgage servicing rights, carried at fair value	23,519		16,631
Less: goodwill and other intangible assets	Less: goodwill and other intangible assets	164,944		122,817			Less: goodwill and other intangible assets	159,150		118,133
Tangible common stockholders’ equity (Non-GAAP)	Tangible common stockholders’ equity (Non-GAAP)	$	1,275,239	$	1,096,955		Tangible common stockholders’ equity (Non-GAAP)	$	1,402,916	$	1,210,886
Common shares outstanding at end of period	Common shares outstanding at end of period	59,494,633		59,215,934			Common shares outstanding at end of period	59,662,795		59,237,765
Tangible book value per common share (Non-GAAP)	Tangible book value per common share (Non-GAAP)	$	21.43	$	18.52		Tangible book value per common share (Non-GAAP)	$	23.51	$	20.44

3032

Table of Contents

SELECTED FINANCIAL DATA

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

AXOS FINANCIAL, INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION


(Dollars in thousands)	(Dollars in thousands)	September 30, 2021			June 30, 2021			September 30, 2020			(Dollars in thousands)	March 31, 2022			June 30, 2021			March 31, 2021
Selected Balance Sheet Data:	Selected Balance Sheet Data:										Selected Balance Sheet Data:
Total assets	Total assets	$	14,906,750		$	14,265,565		$	13,382,238		Total assets	$	16,080,950		$	14,265,565		$	14,827,874
Loans—net of allowance for credit losses	Loans—net of allowance for credit losses	11,879,021			11,414,814			10,925,450			Loans—net of allowance for credit losses	13,093,603			11,414,814			11,711,215
Loans held for sale, carried at fair value	Loans held for sale, carried at fair value	33,344			29,768			89,454			Loans held for sale, carried at fair value	19,611			29,768			61,500
Loans held for sale, lower of cost or fair value	Loans held for sale, lower of cost or fair value	11,949			12,294			14,729			Loans held for sale, lower of cost or fair value	11,182			12,294			13,371
Allowance for credit losses - loans	Allowance for credit losses - loans	136,778			132,958			132,915			Allowance for credit losses - loans	143,372			132,958			138,107
Securities—trading	Securities—trading	1,941			1,983			423			Securities—trading	366			1,983			254
Securities—available-for-sale	Securities—available-for-sale	135,996			187,335			203,931			Securities—available-for-sale	229,510			187,335			218,962

Securities borrowed	Securities borrowed	457,282			619,088			263,470			Securities borrowed	274,644			619,088			543,538
Customer, broker-dealer and clearing receivables	Customer, broker-dealer and clearing receivables	427,169			369,815			283,125			Customer, broker-dealer and clearing receivables	510,561			369,815			351,063
Total deposits	Total deposits	11,747,442			10,815,797			10,555,658			Total deposits	12,733,002			10,815,797			11,612,501

Advances from the FHLB	Advances from the FHLB	157,500			353,500			242,500			Advances from the FHLB	152,500			353,500			172,500
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	255,896			221,358			453,843			Borrowings, subordinated notes and debentures	381,682			221,358			365,753
Securities loaned	Securities loaned	539,505			728,988			315,976			Securities loaned	447,748			728,988			649,837
Customer, broker-dealer and clearing payables	Customer, broker-dealer and clearing payables	510,040			535,425			369,428			Customer, broker-dealer and clearing payables	543,905			535,425			483,677
Total stockholders’ equity	Total stockholders’ equity	1,458,621			1,400,936			1,236,965			Total stockholders’ equity	1,585,585			1,400,936			1,345,650

Capital Ratios:	Capital Ratios:										Capital Ratios:
Equity to assets at end of period	Equity to assets at end of period	9.78		%	9.82		%	9.24		%	Equity to assets at end of period	9.86		%	9.82		%	9.08		%
Axos Financial, Inc.:	Axos Financial, Inc.:										Axos Financial, Inc.:
Tier 1 leverage (core) capital to adjusted average assets	Tier 1 leverage (core) capital to adjusted average assets	9.19		%	8.82		%	8.52		%	Tier 1 leverage (core) capital to adjusted average assets	9.43		%	8.82		%	8.99		%
Common equity tier 1 capital (to risk-weighted assets)	Common equity tier 1 capital (to risk-weighted assets)	10.79		%	11.36		%	11.08		%	Common equity tier 1 capital (to risk-weighted assets)	10.23		%	11.36		%	10.86		%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)	10.79		%	11.36		%	11.13		%	Tier 1 capital (to risk-weighted assets)	10.23		%	11.36		%	10.86		%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)	13.10		%	13.78		%	14.39		%	Total capital (to risk-weighted assets)	13.30		%	13.78		%	13.32		%
Axos Bank:	Axos Bank:										Axos Bank:
Tier 1 leverage (core) capital to adjusted average assets	Tier 1 leverage (core) capital to adjusted average assets	10.14		%	9.45		%	8.83		%	Tier 1 leverage (core) capital to adjusted average assets	10.51		%	9.45		%	9.56		%
Common equity tier 1 capital (to risk-weighted assets)	Common equity tier 1 capital (to risk-weighted assets)	11.89		%	12.28		%	11.52		%	Common equity tier 1 capital (to risk-weighted assets)	11.43		%	12.28		%	11.74		%
Tier 1 capital (to risk-weighted assets)	Tier 1 capital (to risk-weighted assets)	11.89		%	12.28		%	11.52		%	Tier 1 capital (to risk-weighted assets)	11.43		%	12.28		%	11.74		%
Total capital (to risk-weighted assets)	Total capital (to risk-weighted assets)	12.80		%	13.21		%	12.55		%	Total capital (to risk-weighted assets)	12.24		%	13.21		%	12.71		%
Axos Clearing, LLC:	Axos Clearing, LLC:										Axos Clearing, LLC:
Net capital	Net capital	39,663			35,950			34,322			Net capital	$	39,109		$	35,950		33,845
Excess capital	Excess capital	31,435			27,904			28,830			Excess capital	$	31,612		$	27,904		26,338
Net capital as a percentage of aggregate debit items	Net capital as a percentage of aggregate debit items	9.64		%	8.94		%	12.50		%	Net capital as a percentage of aggregate debit items	10.43		%	8.94		%	9.02		%
Net capital in excess of 5% aggregate debit items	Net capital in excess of 5% aggregate debit items	19,092			15,836			20,590			Net capital in excess of 5% aggregate debit items	$	20,369		$	15,836		15,077

3133

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION


		At or for the Three Months Ended						At or for the Three Months Ended					At or for the Nine Months Ended
		September 30,						March 31,					March 31,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2021			2020				(Dollars in thousands, except per share data)	2022			2021			2022			2021
Selected Income Statement Data:	Selected Income Statement Data:								Selected Income Statement Data:
Interest and dividend income	Interest and dividend income	$	158,310		$	149,889			Interest and dividend income	$	160,181		$	155,674		$	475,567		$	460,942
Interest expense	Interest expense	11,668			22,562				Interest expense	10,643			20,005			33,819			63,854
Net interest income	Net interest income	146,642			127,327				Net interest income	149,538			135,669			441,748			397,088
Provision for credit losses	Provision for credit losses	4,000			11,800				Provision for credit losses	4,500			2,700			12,500			22,500
Net interest income after provision for credit losses	Net interest income after provision for credit losses	142,642			115,527				Net interest income after provision for credit losses	145,038			132,969			429,248			374,588
Non-interest income	Non-interest income	26,702			35,855				Non-interest income	28,774			23,887			86,263			88,460
Non-interest expense	Non-interest expense	84,431			75,546				Non-interest expense	86,819			80,807			257,269			232,650
Income before income tax expense	Income before income tax expense	84,913			75,836				Income before income tax expense	86,993			76,049			258,242			230,398
Income tax expense	Income tax expense	24,703			22,814				Income tax expense	25,170			22,404			75,422			68,946
Net income	Net income	$	60,210		$	53,022			Net income	$	61,823		$	53,645		$	182,820		$	161,452
Net income attributable to common stock	Net income attributable to common stock	$	60,210		$	52,945			Net income attributable to common stock	$	61,823		$	53,645		$	182,820		$	161,262

Per Common Share Data:	Per Common Share Data:								Per Common Share Data:
Net income:	Net income:								Net income:
Basic	Basic	$	1.01		$	0.89			Basic	$	1.04		$	0.91		$	3.07		$	2.72
Diluted	Diluted	$	0.99		$	0.88			Diluted	$	1.02		$	0.89		$	3.02		$	2.67
Adjusted earnings (Non-GAAP)	Adjusted earnings (Non-GAAP)	$	1.03		$	0.91			Adjusted earnings (Non-GAAP)	$	1.05		$	0.92		$	3.12		$	2.76
Book value	Book value	$	24.52		$	20.80			Book value	$	26.58		$	22.72		$	26.58		$	22.72
Tangible book value (Non-GAAP)	Tangible book value (Non-GAAP)	$	21.43		$	18.52			Tangible book value (Non-GAAP)	$	23.51		$	20.44		$	23.51		$	20.44

Weighted average number of common shares outstanding:	Weighted average number of common shares outstanding:								Weighted average number of common shares outstanding:
Basic	Basic	59,390,846			59,509,320				Basic	59,542,128			59,118,884			59,476,488			59,225,409
Diluted	Diluted	60,644,288			59,926,784				Diluted	60,611,959			60,482,733			60,605,486			60,453,220
Common shares outstanding at end of period	Common shares outstanding at end of period	59,494,633			59,215,934				Common shares outstanding at end of period	59,662,795			59,237,765			59,662,795			59,237,765
Common shares issued at end of period	Common shares issued at end of period	68,370,617			67,622,935				Common shares issued at end of period	68,617,410			67,902,239			68,617,410			67,902,239

Performance Ratios and Other Data:	Performance Ratios and Other Data:								Performance Ratios and Other Data:
Loan originations for investment	Loan originations for investment	$	2,092,279		$	1,330,812			Loan originations for investment	$	2,363,599		$	1,189,750		$	6,981,749		$	4,430,540
Loan originations for sale	Loan originations for sale	$	209,967		$	440,804			Loan originations for sale	$	166,327		$	418,618		$	569,614		$	1,349,683

Return on average assets	Return on average assets	1.66		%	1.56		%		Return on average assets	1.59		%	1.52		%	1.63		%	1.55		%
Return on average common stockholders’ equity	Return on average common stockholders’ equity	16.20		%	17.26		%		Return on average common stockholders’ equity	15.89		%	16.12		%	16.33		%	16.90		%
Interest rate spread1	Interest rate spread1	4.04		%	3.62		%		Interest rate spread1	3.84		%	3.73		%	3.93		%	3.69		%
Net interest margin2	Net interest margin2	4.22		%	3.84		%		Net interest margin2	4.02		%	3.96		%	4.11		%	3.91		%
Net interest margin2 – Banking Business Segment only		4.48		%	3.91		%
Net interest margin2 – Banking Business Segment									Net interest margin2 – Banking Business Segment	4.21		%	4.23		%	4.33		%	4.09		%
Efficiency ratio3	Efficiency ratio3	48.71		%	46.30		%		Efficiency ratio3	51.26		%	50.64		%	48.72		%	47.91		%
Efficiency ratio3 – Banking Business Segment only		39.93		%	39.95		%
Efficiency ratio3 – Banking Business Segment									Efficiency ratio3 – Banking Business Segment	39.79		%	42.33		%	39.70		%	40.90		%

Asset Quality Ratios:	Asset Quality Ratios:								Asset Quality Ratios:
Net annualized charge-offs to average loans	Net annualized charge-offs to average loans	0.01		%	0.07		%		Net annualized charge-offs to average loans	0.05		%	0.03		%	0.02		%	0.09		%
Non-performing loans to total loans	Non-performing loans to total loans	1.12		%	1.56		%		Non-performing loans to total loans	1.05		%	1.14		%	1.05		%	1.14		%
Non-performing assets to total assets	Non-performing assets to total assets	0.94		%	1.33		%		Non-performing assets to total assets	0.87		%	0.96		%	0.87		%	0.96		%
Allowance for credit losses - loans to total loans held for investment at end of period	Allowance for credit losses - loans to total loans held for investment at end of period	1.14		%	1.20		%		Allowance for credit losses - loans to total loans held for investment at end of period	1.08		%	1.16		%	1.08		%	1.16		%
Allowance for credit losses - loans to non-performing loans	Allowance for credit losses - loans to non-performing loans	101.97		%	77.23		%		Allowance for credit losses - loans to non-performing loans	103.33		%	101.84		%	103.33		%	101.84		%

1 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.

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

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

3234

Table of Contents

RESULTS OF OPERATIONS

Comparison of the Three and Nine Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

For the three months ended ~~September 30, 2021,~~March 31, 2022, we had net income of ~~$60.2~~$61.8 million compared to net income of ~~$53.0~~$53.6 million for the three months ended ~~September 30, 2020.~~March 31, 2021. Net income attributable to common stockholders was ~~$60.2~~$61.8 million or ~~$0.99~~$1.02 per diluted share for the three months ended ~~September 30, 2021~~March 31, 2022 compared to net income attributable to common ~~stockholders~~shareholders of ~~$52.9~~$53.6 million, or ~~$0.88~~$0.89 per diluted share for the three months ended ~~September 30, 2020.~~March 31, 2021.For the nine months ended March 31, 2022, we had net income of $182.8 million compared to net income of $161.5 million for the nine months ended March 31, 2021. Net income attributable to common stockholders was $182.8 million, or $3.02 per diluted share for the nine months ended March 31, 2022 compared to net income attributable to common shareholders of $161.3 million, or $2.67 per diluted share for the nine months ended March 31, 2021.

Adjusted earnings and adjusted EPS, non-GAAP measures, which exclude ~~non-cash amortization expenses and~~ non-recurring costs related to mergers and acquisitions ~~expenses,~~(including amortization of intangible assets related to acquisitions), increased ~~13.5%~~15.2% to ~~$62.2~~$63.8 million and ~~$1.03, for the quarter ended September 30, 2021 compared~~14.1% to ~~$54.8 million and $0.91,~~$1.05, respectively, for the quarter ended ~~September 30, 2020.~~March 31, 2022 compared to $55.4 million and $0.92, respectively, for the quarter ended March 31, 2021. Adjusted earnings and adjusted EPS increased 13.3% to $189.0 million and 13.0% to $3.12, respectively, for the nine months ended March 31, 2022 compared to $166.8 million and $2.76, respectively, for the nine months ended March 31, 2021.

Net Interest Income

Net interest income for the three and nine months ended ~~September 30, 2021~~March 31, 2022 totaled ~~$146.6~~$149.5 million and $441.7 million, an increase of ~~15.2%~~10.2% and 11.2%, compared to net interest income of ~~$127.3~~$135.7 million and $397.1 million for the three and nine months ended ~~September 30, 2020.~~March 31, 2021, respectively. The ~~growth of net interest income~~increase for the three and nine months ~~ended September 30, 2021 compared to September 30, 2020 is~~were primarily due to increased average earnings assets from net loan portfolio growth and reduced rates paid on interest-bearing demand and savings deposits and time deposits, partially offset by reduced yields on interest earning assets. During the three and nine months ended ~~September 30, 2021,~~March 31, 2022, average non-interest bearing deposits increased ~~$1,158.1~~$2,001.2 million and $1,628.7 million, respectively, primarily from the deposits acquired through the acquisition of AAS.

Total interest and dividend income during the three and nine months ended ~~September 30, 2021~~March 31, 2022 increased ~~5.6%~~2.9% to ~~$158.3~~$160.2 million and 3.2% to $475.6 million, compared to ~~$149.9~~$155.7 million and $460.9 million during the three and nine months ended ~~September 30, 2020.~~March 31, 2021, respectively. The increase in interest and dividend income for the three months ended ~~September 30, 2021~~March 31, 2022 was primarily attributable to the growth in average earning assets from loan originations, partially offset by reduced yields on loans. The average balance of loans increased by 10.7% for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in interest and dividend income for the nine months ended March 31, 2022 was primarily attributable to the growth in average earning assets from loan originations and securities borrowed and margin lending, partially offset by reduced yields on loans and securities borrowed and margin lending. The average balance of loans and securities borrowed increased by ~~7.6%~~8.2% and ~~84.6%~~35.6%, respectively, for the ~~three~~nine months ended ~~September 30, 2021~~March 31, 2022 compared to the ~~three~~nine months ended ~~September 30, 2020.~~March 31, 2021.

Total interest expense was ~~$11.7~~$10.6 million for the three months ended ~~September 30, 2021,~~March 31, 2022, a decrease of ~~$10.9~~$9.4 million or ~~48.3%~~46.8% as compared with the ~~quarter~~three months ended ~~September 30, 2020.~~March 31, 2021. Total interest expense was $33.8 million for the nine months ended March 31, 2022, a decrease of $30.0 million or 47.0% as compared with the nine months ended March 31, 2021. The decrease in the average cost of funds rate for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~2020~~2021 was primarily due to ~~a 30~~16 basis point decrease ~~in average rates paid~~ on interest-bearing demand and savings ~~deposits due to decreases in prevailing market deposit rates, an 81 basis point decrease in average rates paid on time~~ deposits due to decreases in prevailing deposit rates across the industry and a ~~33.8%~~64 basis point decrease in the three month average rates paid on time deposits, due to higher rate time deposits maturing. The decrease in the average ~~balance~~cost of funds rate for the nine months ended March 31, 2022 compared to 2021 was primarily due to a 22 basis point decrease on interest-bearing demand and savings deposits due to decreases in prevailing deposit rates across the industry and a 71 basis point decrease in the nine month average rates paid on time ~~deposits.~~deposits, due to higher rate time deposits maturing. During the three and nine months ended ~~September 30, 2021,~~March 31, 2022, average non-interest bearing deposits increased ~~$1,158.1~~$2,001.2 million and $1,628.7 million, respectively, primarily from the ~~EAS~~deposits acquired through the acquisition ~~replacing interest bearing deposits and borrowings.~~of AAS.

Net interest margin, defined as annualized net interest income divided by average ~~interest-earning~~earning assets, increased ~~by 38~~6 basis points to ~~4.22%~~4.02% for the three months ended ~~September 30, 2021 compared to~~March 31, 2022 from 3.96% for the three months ended ~~September 30, 2020.~~March 31, 2021, and increased 20 basis points to 4.11% for the nine months ended March 31, 2022 from 3.91% for the nine months ended March 31, 2021. During the three and nine months ended ~~September 30, 2021,~~March 31, 2022, the primary contributors to the 386 and 20 basis point ~~increase were~~increases, respectively, was the increase in non-interest bearing deposits ~~of $1,158.1~~which increased $2,001.2 million and $1,628.7 million, respectively, primarily from the deposits acquired through the acquisition of AAS ~~along with a reduction in the level of low-yielding interest-earning deposits in other financial institutions.~~and decreased rates on interest-bearing deposits.

3335

Table of Contents

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													For the Three Months Ended
		September 30,													March 31,
		2021						2020							2022						2021
(Dollars in thousands)	(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:	Assets:													Assets:
Loans3, 4	Loans3, 4	$	11,662,383	$	149,176	5.12	%	$	10,842,218	$	141,424	5.22	%	Loans3, 4	$	12,842,705	$	153,873	4.79	%	$	11,600,551	$	147,936	5.10	%
Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions	1,163,143		591		0.20	%	1,706,582		507		0.12	%	Interest-earning deposits in other financial institutions	1,286,665		671		0.21	%	1,267,091		482		0.15	%
Mortgage-backed and other investment securities4	Mortgage-backed and other investment securities4	156,360		1,421		3.64	%	189,631		2,677		5.65	%	Mortgage-backed and other investment securities4	162,400		1,546		3.81	%	214,712		2,590		4.83	%
Securities borrowed and margin lending5	Securities borrowed and margin lending5	903,542		6,851		3.03	%	489,565		5,077		4.15	%	Securities borrowed and margin lending5	563,018		3,833		2.72	%	616,774		4,453		2.89	%
Stock of the regulatory agencies	Stock of the regulatory agencies	20,694		271		5.24	%	20,609		204		3.96	%	Stock of the regulatory agencies	21,333		258		4.84	%	20,612		213		4.13	%
Total interest-earning assets	Total interest-earning assets	13,906,122		158,310		4.55	%	13,248,605		149,889		4.53	%	Total interest-earning assets	14,876,121		160,181		4.31	%	13,719,740		155,674		4.54	%
Non-interest-earning assets	Non-interest-earning assets	596,295						362,957						Non-interest-earning assets	731,997						413,297
Total assets	Total assets	$	14,502,417					$	13,611,562					Total assets	$	15,608,118					$	14,133,037
Liabilities and Stockholders’ Equity:	Liabilities and Stockholders’ Equity:													Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	Interest-bearing demand and savings	$	6,564,620	$	3,567	0.22	%	$	7,052,323	$	9,091	0.52	%	Interest-bearing demand and savings	$	6,922,600	$	3,808	0.22	%	$	7,083,540	$	6,691	0.38	%
Time deposits	Time deposits	1,363,061		4,145		1.22	%	2,058,540		10,463		2.03	%	Time deposits	1,194,452		3,116		1.04	%	1,748,271		7,343		1.68	%
Securities loaned														Securities loaned	365,808		152		0.17	%	443,502		453		0.41	%

Securities loaned		660,040		251		0.15	%	302,601		124		0.16	%
Advances from the FHLB	Advances from the FHLB	295,402		1,016		1.38	%	242,500		1,372		2.26	%	Advances from the FHLB	289,289		973		1.35	%	194,564		992		2.04	%
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	223,837		2,689		4.81	%	256,563		1,512		2.36	%	Borrowings, subordinated notes and debentures	295,910		2,594		3.51	%	413,858		4,526		4.37	%
Total interest-bearing liabilities	Total interest-bearing liabilities	9,106,960		11,668		0.51	%	9,912,527		22,562		0.91	%	Total interest-bearing liabilities	9,068,059		10,643		0.47	%	9,883,735		20,005		0.81	%
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	3,191,171						1,903,205						Non-interest-bearing demand deposits	4,210,508						2,209,297
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	717,725						563,450						Other non-interest-bearing liabilities	772,800						708,542
Stockholders’ equity	Stockholders’ equity	1,486,561						1,232,380						Stockholders’ equity	1,556,751						1,331,463
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	14,502,417					$	13,611,562					Total liabilities and stockholders’ equity	$	15,608,118					$	14,133,037
Net interest income	Net interest income			$	146,642					$	127,327			Net interest income			$	149,538					$	135,669
Interest rate spread6	Interest rate spread6					4.04	%					3.62	%	Interest rate spread6					3.84	%					3.73	%
Net interest margin7	Net interest margin7					4.22	%					3.84	%	Net interest margin7					4.02	%					3.96	%

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. Loan fee income is not significant. Loans include average balances of ~~$26.7~~$26.3 million and ~~$27.5~~$27.1 million of Community Reinvestment Act loans which are taxed at a reduced rate for the ~~2021~~2022 and ~~2020~~2021 three-month periods, respectively.

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.

Table of Contents

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


	For the Nine Months Ended
	March 31,
	2022						2021
(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	$	12,202,523	$	452,518	4.94	%	$	11,281,748	$	436,445	5.16	%
Interest-earning deposits in other financial institutions	1,232,100		1,904		0.21	%	1,491,437		1,482		0.13	%
Mortgage-backed and other investment securities4	152,623		4,304		3.76	%	202,327		8,184		5.39	%
Securities borrowed and margin lending5	718,956		16,050		2.98	%	530,384		14,196		3.57	%
Stock of the regulatory agencies	20,845		791		5.06	%	20,611		635		4.11	%
Total interest-earning assets	14,327,047		475,567		4.43	%	13,526,507		460,942		4.54	%
Non-interest-earning assets	624,184						379,629
Total assets	$	14,951,231					$	13,906,136
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	6,683,286	$	11,674	0.23	%	$	7,117,471	$	23,913	0.45	%
Time deposits	1,297,870		10,767		1.11	%	1,889,983		25,770		1.82	%
Securities loaned	489,189		621		0.17	%	380,035		832		0.29	%

Advances from the FHLB	285,547		2,962		1.38	%	224,119		3,690		2.20	%
Borrowings, subordinated notes and debentures	264,523		7,795		3.93	%	366,407		9,649		3.51	%
Total interest-bearing liabilities	9,020,415		33,819		0.50	%	9,978,015		63,854		0.85	%
Non-interest-bearing demand deposits	3,678,067						2,049,366
Other non-interest-bearing liabilities	760,083						603,999
Stockholders’ equity	1,492,666						1,274,756
Total liabilities and stockholders’ equity	$	14,951,231					$	13,906,136
Net interest income			$	441,748					$	397,088
Interest rate spread6					3.93	%					3.69	%
Net interest margin7					4.11	%					3.91	%

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. Loan fee income is not significant. Loans include average balances of $26.5 million and $27.3 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2022 and 2021 nine-month periods, respectively.

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.

Table of Contents

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); (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 both, based on their relative absolute values.


		For the Three Months Ended	For the Three Months Ended					For the Nine Months Ended
		September 30,	March 31,					March 31,
		2021 vs 2020	2022 vs 2021					2022 vs 2021
		Increase (Decrease) Due to	Increase (Decrease) Due to					Increase (Decrease) Due to
(Dollars in thousands)	(Dollars in thousands)			Volume		Rate			Total Increase (Decrease)		(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)		Volume		Rate		Total Increase (Decrease)
Increase (decrease) in interest income:
Increase / (decrease) in interest income:											Increase / (decrease) in interest income:
Loans	Loans			$	10,512	$	(2,760)		$	7,752	Loans	$	15,257	$	(9,320)	$	5,937	$	35,013	$	(18,940)	$	16,073

Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions			(193)		277			84		Interest-earning deposits in other financial institutions	7		182		189		(301)		723		422
Mortgage-backed and other investment securities	Mortgage-backed and other investment securities			(415)		(841)			(1,256)		Mortgage-backed and other investment securities	(559)		(485)		(1,044)		(1,739)		(2,141)		(3,880)
Securities borrowed and margin lending	Securities borrowed and margin lending			3,423		(1,649)			1,774		Securities borrowed and margin lending	(370)		(250)		(620)		4,470		(2,616)		1,854
Stock of the regulatory agencies	Stock of the regulatory agencies			1		66			67		Stock of the regulatory agencies	7		38		45		7		149		156
				$	13,328	$	(4,907)		$	8,421		$	14,342	$	(9,835)	$	4,507	$	37,450	$	(22,825)	$	14,625
Increase (decrease) in interest expense:
Increase / (decrease) in interest expense:											Increase / (decrease) in interest expense:
Interest-bearing demand and savings	Interest-bearing demand and savings			$	(591)	$	(4,933)		$	(5,524)	Interest-bearing demand and savings	$	(148)	$	(2,735)	$	(2,883)	$	(1,357)	$	(10,882)	$	(12,239)
Time deposits	Time deposits			(2,897)		(3,421)			(6,318)		Time deposits	(1,919)		(2,308)		(4,227)		(6,682)		(8,321)		(15,003)
Securities loaned											Securities loaned	(70)		(231)		(301)		194		(405)		(211)

Securities loaned				135		(8)			127
Advances from the FHLB	Advances from the FHLB			256		(612)			(356)		Advances from the FHLB	385		(404)		(19)		860		(1,588)		(728)
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures			(215)		1,392			1,177		Borrowings, subordinated notes and debentures	(1,143)		(789)		(1,932)		(2,910)		1,056		(1,854)
				$	(3,312)	$	(7,582)		$	(10,894)		$	(2,895)	$	(6,467)	$	(9,362)	$	(9,895)	$	(20,140)	$	(30,035)

Provision for Credit Losses

The provision for credit losses was ~~$4.0~~$4.5 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$11.8~~$2.7 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The provision for credit losses was $12.5 million for the nine months ended March 31, 2022 compared to $22.5 million for the nine months ended March 31, 2021. The increase in the provision for the three months ended March 31, 2022 was due to growth in the loan portfolio. The decrease in the provision for the nine months ended March 31, 2022 was ~~primarily~~ due to ~~a $6.5 million additional reserve for non-recurring Refund Advance loans for the three months ended September 30, 2020, and~~ favorable changes in economic and business conditions resulting from ~~the~~ reduced levels of disruptions from the COVID-19 ~~infections~~pandemic between ~~September 30, 2020~~March 31, 2021 and September 30, 2021. Provisions for credit losses for the three months ended September 30, 2021 were primarily comprised of provisions in commercial real estate and consumer and auto due to growth in these segments of the loan portfolio,March 31, 2022, partially offset by ~~a decrease in provisions for commercial~~loan growth and ~~industrial - non-RE as a result of~~ changes in loan ~~mix in this loan portfolio segment.~~mix. Provisions for credit losses are charged to income to bring the allowance for credit losses - loans to a level deemed appropriate by management based on the factors discussed under “Financial Condition—Asset Quality and Allowance for Credit Losses - Loans.”

Table of Contents

Non-Interest Income

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


		For the Three Months Ended						For the Three Months Ended				For the Nine Months Ended
		September 30,						March 31,				March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		Inc (Dec)			(Dollars in thousands)	2022		2021		Inc (Dec)		2022		2021		Inc (Dec)

Prepayment penalty fee income	Prepayment penalty fee income	$	2,986	$	1,368	$	1,618		Prepayment penalty fee income	$	2,793	$	1,342	$	1,451	$	9,073	$	4,289	$	4,784
Gain on sale – other	Gain on sale – other	17		334		(317)			Gain on sale – other	61		214		(153)		106		704		(598)
Mortgage banking income	Mortgage banking income	5,253		19,567		(14,314)			Mortgage banking income	5,729		9,037		(3,308)		15,594		39,255		(23,661)
Broker-dealer fee income	Broker-dealer fee income	11,766		5,702		6,064			Broker-dealer fee income	12,913		7,942		4,971		39,046		19,931		19,115
Banking and service fees	Banking and service fees	6,680		8,884		(2,204)			Banking and service fees	7,278		5,352		1,926		22,444		24,281		(1,837)
Total non-interest income	Total non-interest income	$	26,702	$	35,855	$	(9,153)		Total non-interest income	$	28,774	$	23,887	$	4,887	$	86,263	$	88,460	$	(2,197)

Non-interest income ~~decreased $9.2~~increased $4.9 million to ~~$26.7~~$28.8 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020.~~March 31, 2021. The ~~decrease~~increase was primarily the result of a ~~decrease~~$5.0 million increase in broker-dealer fee income driven by custody and mutual fund fees earned by the newly acquired AAS division, an increase of ~~$14.3 million in mortgage banking income, a decrease of $2.2~~$1.9 million in banking and service fees, ~~primarily~~and an increase of $1.5 million in prepayment penalty fee income, partially offset by a decrease of $3.3 million in mortgage banking income. Mortgage banking income for the three months ended March 31, 2022 included a mortgage servicing rights fair market value adjustment of approximately $3.0 million due to expected higher interest rates and slower mortgage prepayments. The fair value adjustment for the three months ended March 31, 2021 was $0.5 million. Non-interest income decreased $2.2 million to $86.3 million for the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021. The change was primarily the result of a $23.7 million decrease in mortgage banking income and a $1.8 million decrease in banking and service fees, from Emerald Prepaid Mastercard® and Refund Transfer products associated with H&R Block that did not recur in the ~~three~~nine months ended ~~September 30, 2021,~~March 31, 2022, partially offset by ana $19.1 million increase ~~of $6.1 million~~ in broker-dealer fee income driven by custody and mutual fund fees earned by the newly acquired AAS division and an increase of ~~$1.6~~$4.8 million in prepayment penalty fee income.

Table of Contents

Non-Interest Expense

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


		For the Three Months Ended						For the Three Months Ended				For the Nine Months Ended
		September 30,						March 31,				March 31,
(Dollars in thousands)	(Dollars in thousands)	2021		2020		Inc (Dec)			(Dollars in thousands)	2022		2021		Inc (Dec)		2022		2021		Inc (Dec)
Salaries and related costs	Salaries and related costs	$	40,737	$	38,623	$	2,114		Salaries and related costs	$	43,133	$	38,545	$	4,588	$	123,849	$	115,367	$	8,482
Data processing	Data processing	12,092		7,928		4,164			Data processing	12,274		10,171		2,103		36,565		27,772		8,793
Advertising and promotional	Advertising and promotional	3,372		2,556		816			Advertising and promotional	3,357		4,261		(904)		10,131		10,600		(469)
Depreciation and amortization	Depreciation and amortization	5,728		6,186		(458)			Depreciation and amortization	6,061		5,865		196		18,574		17,913		661
Professional services	Professional services	4,545		5,999		(1,454)			Professional services	4,346		5,712		(1,366)		14,834		17,340		(2,506)
Occupancy and equipment	Occupancy and equipment	3,181		3,011		170			Occupancy and equipment	3,742		3,096		646		10,265		9,239		1,026
FDIC and regulator fees		2,266		2,692		(426)
FDIC and regulatory fees									FDIC and regulatory fees	3,115		3,107		8		7,856		8,400		(544)

Broker-dealer clearing charges	Broker-dealer clearing charges	4,005		2,257		1,748			Broker-dealer clearing charges	3,561		3,278		283		11,244		7,986		3,258

Other general and administrative		8,505		6,294		2,211
General and administrative expense									General and administrative expense	7,230		6,772		458		23,951		18,033		5,918
Total non-interest expenses	Total non-interest expenses	$	84,431	$	75,546	$	8,885		Total non-interest expenses	$	86,819	$	80,807	$	6,012	$	257,269	$	232,650	$	24,619

Non-interest expense, which is comprised of compensation, data processing, depreciation and amortization, advertising and promotional, professional services, occupancy and equipment, FDIC and ~~regulator~~regulatory fees, broker-dealer clearing charges and other operating expenses, was ~~$84.4~~$86.8 million for the three months ended ~~September 30, 2021, up from $75.5~~March 31, 2022, compared to $80.8 million for the three months ended ~~September 30, 2020.~~March 31, 2021. Non-interest expense was $257.3 million for the nine months ended March 31, 2022, up from $232.7 million for the nine months ended March 31, 2021. The ~~increase in non-interest expense~~increases for the three and nine months ended ~~September 30, 2021 was~~March 31, 2022 were generally due to the addition of AAS and the expansion of ~~the Company~~Bank operations specifically in areas related to lending and deposits.

Total salaries and related costs increased ~~$2.1~~$4.6 million to ~~$40.7~~$43.1 million for the ~~quarter~~three months ended ~~September 30, 2021,~~March 31, 2022 compared to ~~$38.6~~$38.5 million for the ~~quarter~~three months ended ~~September 30, 2020,~~March 31, 2021 and increased $8.5 million to $123.8 million for the nine months ended March 31, 2022 compared to $115.4 million for the nine months ended March 31, 2021. The increases in compensation expense for the three and nine months ended March 31, 2022 were primarily due to increased staffing levels as a result of the AAS acquisition. Our staff increased to ~~1,282~~1,294 from ~~1,108,~~1,152, or ~~15.7%~~12.3% between ~~September 30, 2021~~March 31, 2022 and ~~September 30, 2020, which includes the addition of 124 employees for AAS.~~2021.

Data processing expense increased ~~$4.2~~$2.1 million for the three months ended ~~September 30,~~March 31, 2022 compared to three months ended March 31, 2021, and increased $8.8 million for the nine months ended March 31, 2022 compared to the ~~three months~~nine month period ended ~~September 30, 2020. The increase was~~March 31, 2021, primarily due to ~~additions~~ enhancements to customer interfaces and the Company’s core processing systems.

~~Depreciation~~Advertising and ~~amortization~~promotional expense decreased $0.9 million and $0.5 million for the three and nine months ended ~~September 30, 2021,~~March 31, 2022, compared to the three and nine months ended ~~September 30, 2020. The decrease largely resulted from useful lives terminating on certain intangible assets acquired through acquisitions that reached~~March 31, 2021, respectively. Fluctuations are mainly the ~~end~~result of ~~their useful lives as planned prior to the three months ended September 30, 2021.~~changes in mortgage lead generation and deposit marketing costs.

~~Advertising~~Depreciation and ~~promotional~~amortization expense increased ~~$0.8~~$0.2 million and $0.7 million for the three and nine months ended ~~September 30, 2021,~~March 31, 2022, compared to the three and nine months ended ~~September 30, 2020.~~March 31, 2021, respectively. The ~~increase was~~increases for the three and nine months ended March 31, 2022 were primarily due to ~~increased lead generation~~amortization of intangibles as a result of the AAS acquisition and ~~deposit~~

~~marketing costs.~~depreciation on lending platform enhancements and infrastructure development.

Professional services ~~which include accounting, consulting~~expense decreased $1.4 million and ~~legal fees,~~ decreased ~~$1.5~~$2.5 million for the three and nine months ended ~~September 30, 2021~~March 31, 2022, compared to the three and nine months ended ~~September 30, 2020. The decrease is~~March 31, 2021, respectively. Professional services charges decreased due primarily ~~the result of~~to lower legal ~~expenses.~~expense during the three and nine months ended March 31, 2022.

Occupancy and equipment expense increased ~~$0.2~~by $0.6 million and $1.0 million for the three and nine months ended ~~September 30, 2021~~March 31, 2022 compared to the three and nine months ended ~~September 30, 2020,~~March 31, 2021, respectively. The changes for the three and nine months ended March 31, 2022 are primarily due to annual cost increases in our office space lease agreements and the addition of an assumed office space lease for our AAS employees.

~~The~~

Our cost of ~~our~~ FDIC and ~~OCC standard~~ regulatory ~~charges~~fees was flat and decreased ~~$0.4~~$0.5 million for the three and nine months ended ~~September 30, 2021,~~March 31, 2022, compared to the three and nine month period ~~ending September 30, 2020~~last year, respectively. The decrease were due to ~~the changes~~favorable fluctuations in the Bank’s ~~mix of liabilities used for the assessment.~~assessment rate. As an FDIC-insured institution, the Bank is required to pay deposit insurance premiums to the FDIC.

Broker-dealer clearing charges increased $1.7 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase was attributable to increased activity and correlated clearing charges in the Securities Business including the acquisition of AAS.

3740

Table of Contents

Broker-dealer clearing charges increased $0.3 million and $3.3 million for the three and nine months ended March 31, 2022 compared to the three and nine months ended March 31, 2021, respectively. The increases were attributable to the acquisition of AAS and increased clearing charges due to higher activity during the three and nine months ended March 31, 2022.

Other general and administrative costs increased by ~~$2.2~~$0.5 million and $5.9 million for the three and nine months ended ~~September 30, 2021,~~March 31, 2022, compared to the three ~~month period~~and nine months ended ~~September 30, 2020~~March 31, 2021, respectively. The increase in the three months ended March 31, 2022 as compared to the three months ended March 31, 2021 was primarily ~~related~~due to a ~~$2.0~~$1.0 million provision to ~~allowance for credit losses~~the unfunded loan commitment liability. The increase in the nine months ended March 31, 2022 as compared to March 31, 2021 was primarily due to a $4.0 million provision to the unfunded loan commitment liability and increased travel costs of ~~unfunded commitments.~~$1.5 million.

Provision for Income Taxes

~~Income tax expense was $24.7 million for the three months ended September 30, 2021 compared to $22.8 million for three months ended September 30, 2020.~~ Our effective income tax rates (income tax provision divided by net income before income tax) for the three months ended ~~September 30,~~March 31, 2022 and 2021 were 28.93% and ~~2020~~29.46%, respectively. Our effective income tax rates for the nine months ended March 31, 2022 and 2021 were ~~29.09%~~29.21% and ~~30.08%~~29.92%, respectively. The change in effective income tax rates between periods are primarily the result of changes in tax benefits from stock compensation.

SEGMENT RESULTS

Our 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. ~~Our~~The Company operates through two operating segments: Banking Business and Securities Business. In order to reconcile the two segments to the unaudited condensed consolidated totals, ~~our~~the Company includes parent-only activities and intercompany eliminations. The following tables present the operating results of the segments:


	For the Three Months Ended March 31, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	147,828	$	3,377	$	(1,667)	$	149,538
Provision for credit losses	4,500		—		—		4,500
Non-interest income	15,741		15,609		(2,576)		28,774
Non-interest expense	65,076		20,242		1,501		86,819
Income before taxes	$	93,993	$	(1,256)	$	(5,744)	$	86,993


	For the Three Months Ended March 31, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	135,096	$	3,847	$	(3,274)	$	135,669
Provision for credit losses	2,700		—		—		2,700
Non-interest income	16,201		8,369		(683)		23,887
Non-interest expense	64,040		13,282		3,485		80,807
Income before taxes	$	84,557	$	(1,066)	$	(7,442)	$	76,049


		Three Months Ended September 30, 2021									For the Nine Months Ended March 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated		(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	Net interest income	$	142,241	$	6,176	$	(1,775)	$	146,642	Net interest income	$	432,328	$	14,059	$	(4,639)	$	441,748
Provision for credit losses	Provision for credit losses	4,000		—		—		4,000		Provision for credit losses	12,500		—		—		12,500
Non-interest income	Non-interest income	14,828		13,106		(1,232)		26,702		Non-interest income	46,864		45,169		(5,770)		86,263
Non-interest expense	Non-interest expense	62,725		19,273		2,433		84,431		Non-interest expense	190,250		61,169		5,850		257,269
Income before taxes	Income before taxes	$	90,344	$	9	$	(5,440)	$	84,913	Income before taxes	$	276,442	$	(1,941)	$	(16,259)	$	258,242

Three Months Ended September 30, 2020
(Dollars in thousands) Banking
Business Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 123,008 $ 4,894 $ (575) $ 127,327
Provision for credit losses 11,800 — — 11,800
Non-interest income 30,212 5,784 (141) 35,855
Non-interest expense 61,217 11,352 2,977 75,546
Income before taxes $ 80,203 $ (674) $ (3,693) $ 75,836

Table of Contents



	For the Nine Months Ended March 31, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	390,268	$	13,002	$	(6,182)	$	397,088
Provision for credit losses	22,500		—		—		22,500
Non-interest income	68,708		20,725		(973)		88,460
Non-interest expense	187,733		35,946		8,971		232,650
Income before taxes	$	248,743	$	(2,219)	$	(16,126)	$	230,398

Banking Business

For the three months ended ~~September 30, 2021, we~~March 31, 2022, our Banking Business segment had income before taxes of ~~$90.3~~$94.0 million compared to income before taxes of ~~$80.2~~$84.6 million for the three months ended ~~September 30, 2020.~~March 31, 2021. For the nine months ended March 31, 2022, we had income before taxes of $276.4 million compared to income before taxes of $248.7 million for the nine months ended March 31, 2021. For the three months ended ~~September 30,~~March 31, 2021, the increase in income before taxes was ~~related to increased net interest income~~mainly due to an increase in ~~average earning assets,~~net interest income primarily from a ~~reduction~~decline in rates of interest-bearing demand and savings deposits and time deposits, partially offset by a decrease in mortgage banking, compared to the three months ended March 31, 2021. For the nine months ended March 31, 2021, the increase in income before taxes was mainly due to an increase in net interest income primarily from a decline in rates ~~paid on~~of interest-bearing demand and savings deposits and time deposits and a decrease in ~~the~~ provision for credit losses, partially offset by a decrease in ~~non-interest income primarily driven by decreased~~ mortgage banking, ~~income.~~compared to the nine months ended March 31, 2021.

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

At or for the Three Months Ended
September 30, 2021 September 30, 2020
Efficiency ratio 39.93 % 39.95 %
Return on average assets 1.92 % 1.78 %
Interest rate spread 4.34 % 3.70 %
Net interest margin 4.48 % 3.91 %

~~Table of Contents~~


	At or for the Three Months Ended				At or for the Nine Months Ended
	March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021
Efficiency ratio	39.79	%	42.33	%	39.70	%	40.90	%
Return on average assets	1.84	%	1.81	%	1.89	%	1.80	%
Interest rate spread	4.06	%	4.05	%	4.17	%	3.90	%
Net interest margin	4.21	%	4.23	%	4.33	%	4.09	%

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 ~~Holding~~Parent 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 ~~borrowings~~securities financing operations that ~~particularly~~typically decrease net interest margin.

Table of Contents

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												For the Three Months Ended
		September 30,												March 31,
		2021						2020						2022						2021
(Dollars in thousands)	(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2	(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:	Assets:												Assets:
Loans3, 4	Loans3, 4	$	11,622,074	$	148,843	5.12	%	$	10,790,869	$	140,678	5.21 %	Loans3, 4	$	12,804,231	$	153,363	4.79	%	$	11,556,228	$	147,264	5.10	%
Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions	879,856		337		0.15	%	1,542,335		392		0.10 %	Interest-earning deposits in other financial institutions	1,042,552		483		0.19	%	949,259		230		0.10 %
Mortgage-backed and other investment securities4	Mortgage-backed and other investment securities4	180,545		1,546		3.43	%	227,081		2,856		5.03 %	Mortgage-backed and other investment securities4	185,952		1,661		3.57	%	242,422		2,733		4.51	%
Stock of the regulatory agencies	Stock of the regulatory agencies	17,824		270		6.06	%	17,250		203		4.71 %	Stock of the regulatory agencies	18,215		258		5.67	%	17,250		212		4.92	%
Total interest-earning assets	Total interest-earning assets	12,700,299		150,996		4.76	%	12,577,535		144,129		4.58 %	Total interest-earning assets	14,050,950		155,765		4.43	%	12,765,159		150,439		4.71	%
Non-interest-earning assets	Non-interest-earning assets	286,810						152,209					Non-interest-earning assets	297,950						161,541
Total assets	Total assets	$	12,987,109					$	12,729,744				Total assets	$	14,348,900					$	12,926,700
Liabilities and Stockholders’ Equity:	Liabilities and Stockholders’ Equity:												Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	Interest-bearing demand and savings	$	6,614,799	$	3,594	0.22	%	$	7,099,034	$	9,155	0.52 %	Interest-bearing demand and savings	$	6,999,385	$	3,848	0.22	%	$	7,256,096	$	6,904	0.38	%
Time deposits	Time deposits	1,363,061		4,145		1.22	%	2,058,540		10,463		2.03 %	Time deposits	1,194,452		3,116		1.04	%	1,748,271		7,343		1.68	%

Advances from the FHLB	Advances from the FHLB	295,402		1,016		1.38	%	242,500		1,372		2.26 %	Advances from the FHLB	289,289		973		1.35	%	194,564		992		2.04	%
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	43		—		—	%	151,952		132		0.35 %	Borrowings, subordinated notes and debentures	33		—		—	%	120,037		104		0.35 %
Total interest-bearing liabilities	Total interest-bearing liabilities	8,273,305		8,755		0.42	%	9,552,026		21,122		0.88 %	Total interest-bearing liabilities	8,483,159		7,937		0.37	%	9,318,968		15,343		0.66	%
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	3,238,709						1,918,856					Non-interest-bearing demand deposits	4,269,702						2,239,439
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	124,213						135,467					Other non-interest-bearing liabilities	135,237						119,605
Stockholders’ equity	Stockholders’ equity	1,350,882						1,123,395					Stockholders’ equity	1,460,802						1,248,688
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	12,987,109					$	12,729,744				Total liabilities and stockholders’ equity	$	14,348,900					$	12,926,700
Net interest income	Net interest income			$	142,241					$	123,007		Net interest income			$	147,828					$	135,096
Interest rate spread5	Interest rate spread5					4.34	%					3.70 %	Interest rate spread5					4.06	%					4.05	%
Net interest margin6	Net interest margin6					4.48	%					3.91 %	Net interest margin6					4.21	%					4.23	%

1Average balances are obtained from daily data.

2Annualized.

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

Table of Contents

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


	For the Nine Months Ended
	March 31,
	2022						2021
(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	$	12,163,066	$	451,166	4.95	%	$	11,234,740	$	434,269	5.15	%
Interest-earning deposits in other financial institutions	961,393		1,196		0.17	%	1,245,733		946		0.10 %
Mortgage-backed and other investment securities4	176,570		4,665		3.52	%	233,946		8,661		4.94	%
Stock of the regulatory agencies	17,811		788		5.90	%	17,250		631		4.88	%
Total interest-earning assets	13,318,840		457,815		4.58	%	12,731,669		444,507		4.66	%
Non-interest-earning assets	295,401						157,825
Total assets	$	13,614,241					$	12,889,494
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	6,742,803	$	11,758	0.23	%	$	7,248,839	$	24,413	0.45	%
Time deposits	1,297,870		10,767		1.11	%	1,889,983		25,770		1.82	%

Advances from the FHLB	285,547		2,962		1.38	%	224,119		3,690		2.20	%
Borrowings, subordinated notes and debentures	113		—		—	%	139,925		366		0.35	%
Total interest-bearing liabilities	8,326,333		25,487		0.41	%	9,502,866		54,239		0.76	%
Non-interest-bearing demand deposits	3,760,771						2,070,747
Other non-interest-bearing liabilities	142,212						127,079
Stockholders’ equity	1,384,925						1,188,802
Total liabilities and stockholders’ equity	$	13,614,241					$	12,889,494
Net interest income			$	432,328					$	390,268
Interest rate spread5					4.17	%					3.90	%
Net interest margin6					4.33	%					4.09	%

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. Loan fee income is not significant. Loans include average balances of $26.5 million and $27.3 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2022 and 2021 nine-month periods, respectively.

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.

Table of Contents

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.~~income for our Banking Business segment. 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); (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 both, based on their relative absolute values.


		For the Three Months Ended	For the Three Months Ended					For the Nine Months Ended
		September 30	March 31,					March 31,
		2021 vs 2020	2022 vs 2021					2022 vs 2021
		Increase (Decrease) Due to	Increase (Decrease) Due to					Increase (Decrease) Due to
(Dollars in thousands)	(Dollars in thousands)			Volume		Rate			Total Increase (Decrease)		(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)		Volume		Rate		Total Increase (Decrease)
Increase / (decrease) in interest income:	Increase / (decrease) in interest income:										Increase / (decrease) in interest income:
Loans	Loans			$	10,636	$	(2,471)		$	8,165	Loans	$	15,364	$	(9,265)	$	6,099	$	34,423	$	(17,526)	$	16,897

Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions			(204)		149			(55)		Interest-earning deposits in other financial institutions	25		228		253		(260)		510		250
Mortgage-backed and other investment securities	Mortgage-backed and other investment securities			(513)		(797)			(1,310)		Mortgage-backed and other investment securities	(566)		(506)		(1,072)		(1,840)		(2,156)		(3,996)
Stock of the regulatory agencies, at cost	Stock of the regulatory agencies, at cost			7		60			67		Stock of the regulatory agencies, at cost	13		33		46		22		135		157
				$	9,926	$	(3,059)		$	6,867		$	14,836	$	(9,510)	$	5,326	$	32,345	$	(19,037)	$	13,308
Increase / (decrease) in interest expense:	Increase / (decrease) in interest expense:										Increase / (decrease) in interest expense:
Interest-bearing demand and savings	Interest-bearing demand and savings			$	(588)	$	(4,973)		$	(5,561)	Interest-bearing demand and savings	$	(237)	$	(2,819)	$	(3,056)	$	(1,581)	$	(11,074)	$	(12,655)
Time deposits	Time deposits			(2,897)		(3,421)			(6,318)		Time deposits	(1,919)		(2,308)		(4,227)		(6,682)		(8,321)		(15,003)

Advances from the FHLB	Advances from the FHLB			256		(612)			(356)		Advances from the FHLB	385		(404)		(19)		860		(1,588)		(728)
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures			(66)		(66)			(132)		Borrowings, subordinated notes and debentures	(52)		(52)		(104)		(183)		(183)		(366)
				$	(3,295)	$	(9,072)		$	(12,367)		$	(1,823)	$	(5,583)	$	(7,406)	$	(7,586)	$	(21,166)	$	(28,752)

The Banking Business segment’s net interest income for the three and nine months ended ~~September 30, 2021~~March 31, 2022 totaled ~~$142.2~~$147.8 million and $432.3 million, an increase of ~~15.6%~~9.4% and an increase of 10.8%, compared to net interest income of ~~$123.0~~$135.1 million and $390.3 million for the three and nine months ended ~~September 30, 2020.~~March 31, 2021, respectively. The ~~growth of net interest income~~increase for the three and nine months ended ~~September 30, 2021 is~~March 31, 2022 was primarily due to ~~an increase~~the reduction in ~~average interest-earning assets and lowered funding costs from~~the rates paid on interest-bearing demand and savings deposits, and ~~time deposits.~~increased interest income due to growth in the loan portfolio, partially offset by reduced yields on interest earning assets.

The Banking Business segment’s non-interest income decreased ~~$15.4 million from $30.2~~$0.5 million to ~~$14.8~~$15.7 million and decreased $21.8 million to $46.9 million for the three and nine months ended March 31, 2022 compared to the three and nine months ended March 31, 2021, respectively. The $0.5 million decrease for the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020. The $15.4 million decrease in non-interest income for the three months ended September 30,~~March 31, 2021, was ~~primarily~~mainly the result of ~~a decrease in~~decreased mortgage banking income of ~~$14.3~~$3.3 million and ~~a decrease~~partially offset by increases in banking and service fees of ~~$2.2~~$1.6 million and prepayment penalty fee income of $1.5 million. The $21.8 million decrease for the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021, was mainly the result of decreased mortgage banking income of $23.7 million and decreased banking and service fees of $2.4 million from Emerald Prepaid Mastercard® and Refund Transfer products associated with H&R Block that did not recur for the nine months ended March 31, 2022, partially offset by ~~an increase~~increases in prepayment penalty fee income of ~~$1.6~~$4.8 million.

The Banking Business segment’s non-interest expense for the three and nine months ended March 31, 2022 increased ~~$1.5~~$1.0 million ~~for~~and $2.5 million, respectively, compared to the three and nine months ended March 31, 2021. For the three months ended ~~September 30, 2021~~March 31, 2022 compared to the three months ended ~~September 30, 2020.~~March 31, 2021, non-interest expense increased $1.0 million mainly the result of a $1.5 million increase in data processing and a $1.0 million increase in salaries and related costs, partially offset by a $1.0 million decrease in depreciation and amortization. For the ~~three~~nine months ended ~~September 30, 2021~~March 31, 2022 compared to the ~~three~~nine months ended ~~September 30, 2020,~~March 31, 2021, the ~~$1.5~~$2.5 million increase ~~of non-interest expense~~ was primarily due to ~~an increase of $3.8~~a $5.7 million ~~for data processing, an increase in advertising and promotional expenses of $1.9 million, and an~~ increase in other general and administrative ~~costs of $1.7~~expenses, a $6.2 million increase in data processing expense, and a $3.8 million increase in advertising and promotional expense, partially offset by a $5.4 million decrease of ~~$2.8 million for~~ salaries and related expenses, a $2.9 million decrease in professional ~~services~~fees, a $2.4 million decrease in depreciation and amortization, and a $1.1 million decrease in regulatory fees.

Table of ~~$1.6 million.~~Contents

Securities Business

For the three months ended ~~September 30, 2021,~~March 31, 2022, our Securities Business segment had ~~income~~a loss before taxes of ~~$9.0 thousand~~$1.3 million compared to a loss before taxes of ~~$0.7~~$1.1 million for the three months ended ~~September 30, 2020.~~March 31, 2021. For the nine months ended March 31, 2022, our Securities Business segment had a loss before taxes of $1.9 million compared to a loss before taxes of $2.2 million for the nine months ended March 31, 2021.

Net interest income for the three months ended ~~September 30, 2021, increased $1.3~~March 31, 2022, decreased $0.5 million to ~~$6.2~~$3.4 million compared to ~~$4.9 million for~~ the three months ended ~~September 30, 2020,~~March 31, 2021. Net interest income for the nine months ended March 31, 2022 increased $1.1 million to $14.1 million compared to the nine months ended March 31, 2021. The changes were primarily as a result of ~~increase~~fluctuations in the average interest-earning balance of securities borrowed and margin lending. In the Securities Business, interest is earned through margin loan balances, securities borrowed, and cash deposit balances. Interest expense is incurred from cash borrowed through bank lines and securities lending.

~~The non-interest~~Non-interest income during the three months ended ~~September 30, 2021, was $13.1~~March 31, 2022, increased $7.2 million to $15.6 million compared to ~~$5.8 million for~~ the three months ended ~~September 30, 2020.~~March 31, 2021. The ~~increase of $7.3~~increases were primarily $7.7 million ~~is the result of an increase of $5.3 million~~

~~Table of Contents~~

attributable to the addition of AAS custody and mutual funds fees, an increase of ~~$0.8 million of clearing and custodial related fees, an increase of $0.6 million in correspondent fees, an increase of $0.5~~$2.3 million in fees earned on FDIC insured bank deposits, partially offset by a decrease of $1.8 million in correspondent fees, and a decrease of $1.2 million of clearing and custodial related fees. Non-interest income during the nine months ended March 31, 2022 increased $24.4 million to $45.2 million compared to the nine months ended March 31, 2021. The increases were primarily $21.1 million attributable to the addition of AAS custody and mutual funds fees, an increase of ~~$0.1~~$4.3 million in fees earned on FDIC insured bank deposits, partially offset by a decrease of $0.9 million in correspondent fees, a decrease of $0.6 million of clearing ~~technology services.~~and custodial related fees.

Non-interest expense increased ~~$7.9~~$7.0 million to ~~$19.3~~$20.2 million for the three months ended ~~September 30, 2021~~March 31, 2022 from the ~~$11.4~~$13.3 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase was primarily related to an increase of ~~$4.4~~$3.0 million in salaries and related expenses related to staffing and the acquisition of AAS, an increase of ~~$1.7~~$1.2 million depreciation and amortization expense, an increase of $0.9 million in occupancy and equipment, an increase of $0.7 million in data processing. Non-interest expense increased $25.2 million to $61.2 million for the nine months ended March 31, 2022, from $35.9 million for the nine months ended March 31, 2021. The increase was primarily related to an increase of $12.1 million in salaries and related expenses related to staffing and the acquisition of AAS, an increase of $3.3 million in broker-dealer clearing charges, an increase of ~~$0.6~~$2.9 million depreciation and amortization expense, an increase of $2.5 million in data processing, an increase of $2.0 million occupancy and equipment expense, and an increase of ~~$0.4~~$1.0 million ~~depreciation~~advertising and ~~amortization~~promotional expense. The increases were primarily the result of the addition of AAS.

~~The following table provides selected~~Selected information ~~for Axos Clearing LLC~~concerning the Securities segment follows as of orand for the three months ended:


								March 31,
(Dollars in thousands)	(Dollars in thousands)	September 30, 2021			September 30, 2020		(Dollars in thousands)	2022			2021
Compensation as a % of net revenue	Compensation as a % of net revenue	43.8		%	40.1 %		Compensation as a % of net revenue	36.7		%	32.4		%
FDIC insured deposit program balances at banks (end of period)		$	1,971,355		$	672,822
FDIC insured program balances (end of period)							FDIC insured program balances (end of period)	$	824,494		$	794,614
Customer margin balances (end of period)	Customer margin balances (end of period)	$	340,995		$	252,867	Customer margin balances (end of period)	$	294,983		$	310,695
Cash reserves for the benefit of customers (end of period)		$	269,358		$	214,550
Customer funds on deposit, including short credits (end of period)							Customer funds on deposit, including short credits (end of period)	$	250,966		$	294,903

Clearing:							Clearing:
Total tickets							Total tickets	1,495,617			1,998,293
Correspondents (end of period)							Correspondents (end of period)	68			64

Securities lending:	Securities lending:						Securities lending:
Interest-earning assets – stock borrowed (end of period)	Interest-earning assets – stock borrowed (end of period)	$	457,282		$	263,470	Interest-earning assets – stock borrowed (end of period)	$	274,644		$	543,538
Interest-bearing liabilities – stock loaned (end of period)	Interest-bearing liabilities – stock loaned (end of period)	$	539,505		$	315,976	Interest-bearing liabilities – stock loaned (end of period)	$	447,748		$	649,837

4146

Table of Contents

FINANCIAL CONDITION

Balance Sheet Analysis

~~Our total~~Total assets increased ~~$0.6~~$1.8 billion, or ~~4.5%~~12.7%, to ~~$14.9~~$16.1 billion, as of ~~September 30, 2021,~~March 31, 2022, up from $14.3 billion at June 30, 2021. The increase in total assets was ~~primarily~~mainly due to an increase of ~~$464.2~~$1.7 billion in net loans held for investment, an increase of $211.5 million in ~~loans. Total liabilities increased $0.6 billion, primarily from~~cash and cash equivalents, and an increase of $140.7 million in ~~deposits of $931.6 million,~~customer, broker-dealer and clearing receivables, partially offset by a decrease of $344.4 million in securities ~~loaned~~borrowed. Total liabilities increased $1.6 billion, primarily due to growth in deposits of ~~$189.5 million.~~$1.9 billion, partially offset by a decrease of $201.0 million in advances from the FHLB and a decrease of $281.2 million in securities loaned.

Loans

Net loans held for investment increased ~~4.1%~~14.7% to ~~$11.9~~$13.1 billion ~~at September 30, 2021~~as of March 31, 2022 from $11.4 billion at June 30, 2021. The increase in the loan portfolio was primarily due to ~~loan originations of $2.1 billion, partially offset by loan repayments~~growth in demand for commercial real estate and ~~other adjustments of $1.6 billion.~~C&I loans.

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

September 30, 2021 June 30, 2021
(Dollars in thousands) Amount Percent Amount Percent
Single Family - Mortgage & Warehouse $ 4,341,174 36.1 % $ 4,359,472 37.8 %
Multifamily and Commercial Mortgage 2,458,200 20.4 % 2,470,454 21.4 %
Commercial Real Estate 3,492,926 29.1 % 3,180,453 27.5 %
Commercial & Industrial - Non-RE 1,239,354 10.3 % 1,123,869 9.7 %
Auto & Consumer 446,656 3.7 % 362,180 3.1 %
Other 42,672 0.4 % 58,316 0.5 %
Total gross loans 12,020,982 100.0 % 11,554,744 100.0 %
Allowance for credit losses - loans (136,778) (132,958)
Unaccreted discounts and loan fees (5,183) (6,972)
Total net loans $ 11,879,021 $ 11,414,814


	March 31, 2022				June 30, 2021
(Dollars in thousands)	Amount		Percent		Amount		Percent
Single Family - Mortgage & Warehouse	$	3,972,103	30.0	%	$	4,359,472	37.8	%
Multifamily and Commercial Mortgage	2,662,517		20.1	%	2,470,454		21.4	%
Commercial Real Estate	4,293,032		32.5	%	3,180,453		27.5	%
Commercial & Industrial - Non-RE	1,780,545		13.4	%	1,123,869		9.7	%
Auto & Consumer	521,936		3.9	%	362,180		3.1	%
Other	16,125		0.1	%	58,316		0.5	%
Total gross loans	13,246,258		100.0	%	11,554,744		100.0	%
Allowance for credit losses - loans	(143,372)				(132,958)
Unaccreted discounts and loan fees	(9,283)				(6,972)
Total net loans	$	13,093,603			$	11,414,814

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. 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, 2021,~~March 31, 2022, the Company had ~~$1,076.9 million~~$1.1 billion of interest only mortgage loans.

4247

Table of Contents

Asset Quality and Allowance for ~~Credit~~Loan and Lease Losses ~~- Loans~~

Non-performing Assets

Non-performing loans are comprised of loans past due 90 days or more on nonaccrual status and other nonaccrual loans. Non-performing assets include non-performing loans plus other real estate owned and repossessed vehicles. At ~~September 30, 2021,~~March 31, 2022, our non-performing loans totaled ~~$134.1~~$138.8 million, or ~~1.12%~~1.05% of total gross loans and our ~~total~~ non-performing ~~assets totaled $140.5 million, or 0.94% of total assets.~~

~~Non-performing~~ loans and foreclosed assets or “non-performing assets” totaled $139.3 million, or 0.87% of total assets.

Non-performing assets consisted of the following as of the dates indicated:

(Dollars in thousands) September 30, 2021 June 30, 2021 Inc (Dec)
Non-performing assets:
Non-accrual loans:
Single Family - Mortgage & Warehouse $ 111,257 $ 105,708 $ 5,549
Multifamily and Commercial Mortgage 6,964 20,428 (13,464)
Commercial Real Estate 15,539 15,839 (300)
Commercial & Industrial - Non-RE — 2,942 (2,942)
Auto & Consumer 374 278 96
Total non-performing loans 134,134 145,195 (11,061)
Foreclosed real estate 6,114 6,547 (433)
Repossessed—Auto and RV 206 235 (29)
Total non-performing assets $ 140,454 $ 151,977 $ (11,523)
Total non-performing loans as a percentage of total loans 1.12 % 1.26 % (0.14) %
Total non-performing assets as a percentage of total assets 0.94 % 1.10 % (0.16) %


(Dollars in thousands)	March 31, 2022			June 30, 2021			Inc (Dec)
Non-performing assets:
Non-accrual loans and leases:
Single Family - Mortgage & Warehouse	$	113,317		$	105,708		$	7,609
Multifamily and Commercial Mortgage	9,667			20,428			(10,761)
Commercial Real Estate	14,952			15,839			(887)
Commercial & Industrial - Non-RE	—			2,942			(2,942)
Auto & Consumer	446			278			168
Other	372			—			372
Total non-performing loans	138,754			145,195			(6,441)
Foreclosed real estate	—			6,547			(6,547)
Repossessed—Auto and RV	564			235			329
Total non-performing assets	$	139,318		$	151,977		$	(12,659)
Total non-performing loans as a percentage of total loans	1.05		%	1.26		%	(0.21)		%
Total non-performing assets as a percentage of total assets	0.87		%	1.07		%	(0.20)		%

Total non-performing assets decreased from $152.0 million at June 30, 2021 to ~~$140.5~~$139.3 million at ~~September 30, 2021.~~March 31, 2022. The decrease in non-performing assets isof approximately $12.7 million, was primarily attributable to resolutions of multifamily, C&I - non-RE, and foreclosed real estate in ~~multifamily and commercial mortgage loans.~~response to improved macro economic factors. Non-performing single-family loans increased by $7.6 million. The Company ended COVID-19 related forbearance for all single family mortgage borrowers during the quarter ended September 30, 2020. Any forbearance granted out of COVID-19 was for six months or less. The ~~weighted average~~weighted-average LTV of the non-performing single family mortgage loans ~~is 51.3%.~~was 57.2% as of March 31, 2022.

The Bank had no performing troubled debt restructurings ~~at September 30, 2021~~as of March 31, 2022 and June 30, 2021. A troubled debt restructuring is a concession made to a borrower experiencing financial difficulties, typically permanent or temporary modifications of principal and interest payments or an extension of maturity dates. When a loan is delinquent and classified as a troubled debt restructuring, no interest is accrued until the borrower demonstrates over time (typically six months) that it can make payments. When a loan is considered a troubled debt restructuring and is on nonaccrual, it is considered non-performing and included in the table above.

Table of Contents

Allowance for Credit Losses - Loans

On July 1, 2020, the Company adopted ASC 326. The update replaces the historical incurred loss model to a current expected loss model, resulting, generally, in earlier recognition of loss. Refer to Note 1 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for ~~further~~greater detail on the accounting adoption along with detail of the processes and approaches involved in determining the allowance for credit losses under the new guidance.

~~Table of Contents~~

The following table reflects management’s allocation of the allowance for credit losses - loans by loan category and the ratio of each loan category to total loans as of the dates indicated:


		September 30, 2021				June 30, 2021					March 31, 2022				June 30, 2021
(Dollars in thousands)	(Dollars in thousands)	Amount of Allowance		Allocation as a % of Allowance		Amount of Allowance		Allocation as a % of Allowance		(Dollars in thousands)	Amount of Allowance		Allocation as a % of Allowance		Amount of Allowance		Allocation as a % of Allowance
Single Family Real Estate	Single Family Real Estate	$	25,329	18.5	%	$	26,604	20.0	%	Single Family Real Estate	$	21,789	15.2	%	$	26,604	20.0	%
Multifamily Real Estate	Multifamily Real Estate	13,359		9.8	%	13,146		9.9	%	Multifamily Real Estate	13,818		9.7	%	13,146		9.9	%
Commercial Real Estate	Commercial Real Estate	65,223		47.7	%	57,928		43.6	%	Commercial Real Estate	69,829		48.7	%	57,928		43.6	%
Commercial and Industrial - Non-RE	Commercial and Industrial - Non-RE	22,519		16.5	%	28,460		21.4	%	Commercial and Industrial - Non-RE	26,268		18.3	%	28,460		21.4	%
Consumer and Auto	Consumer and Auto	10,007		7.3	%	6,519		4.9	%	Consumer and Auto	11,623		8.1	%	6,519		4.9	%
Other	Other	341		0.2	%	301		0.2	%	Other	45		—	%	301		0.2	%
Total	Total	$	136,778	100.0	%	$	132,958	100.0	%	Total	$	143,372	100.0	%	$	132,958	100.0	%

The provision for credit losses was ~~$4.0~~$4.5 million for the three months ended ~~September 30, 2021~~March 31, 2022 compared to ~~$11.8~~$2.7 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The provision for credit losses was $12.5 million for the nine months ended March 31, 2022 compared to $22.5 million for the nine months ended March 31, 2021. The increase in the provision for the three months ended March 31, 2022 was due to growth in the loan portfolio. The decrease in the provision for the nine months ended March 31, 2022 was ~~primarily~~ due to ~~a $6.5 million additional reserve for non-recurring Refund Advance loans for the three months ended September 30, 2020, and~~ favorable changes in economic and business conditions resulting from reduced levels of disruptions from the COVID-19 pandemic between ~~September 30, 2020~~March 31, 2021 and September 30, 2021. Provisions for credit losses for the three months ended September 30, 2021 were primarily comprised of provisions in commercial real estate and consumer and auto due to growth in these segments of the loan portfolio,March 31, 2022, partially offset by ~~a decrease in provisions for commercial~~loan growth and ~~industrial - non-RE as a result of~~ changes in loan ~~mix in this loan portfolio segment.~~mix. We believe that the lower average LTV in the Bank’s mortgage loan portfolio will continue to result in future lower average mortgage loan charge-offs when compared to many other comparable banks. The resolution of the Bank’s 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 ~~$137.9~~$229.9 million as of ~~September 30, 2021,~~March 31, 2022, compared with $189.3 million at June 30, 2021. During the ~~three~~nine months ended ~~September 30, 2021,~~March 31, 2022, we purchased securities for ~~$7.0~~$107.3 million and received principal repayments of approximately ~~$57.8~~$59.5 million in our available-for-sale portfolio. The remainder of the change for the available-for-sale portfolio is attributable to accretion and other activities.

Table of Contents

Deposits

Deposits increased ~~by $931.6 million,~~a net $1.9 billion, or ~~8.6%~~17.7%, to ~~$11,747.4 million~~$12.7 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$10,815.8 million~~$10.8 billion at June 30, 2021. ~~Interest bearing deposits decreased $94.1 million and time deposits decreased $132.4 million as higher costing deposits were run off.~~ Non-interest bearing deposits increased ~~$1,158.1 million,~~$1.7 billion, or ~~46.8%~~67.1%, to ~~$3,632.5 million~~$4.1 billion at ~~September 30, 2021,~~March 31, 2022, from ~~$2,474.4 million at~~ June 30, 2021, primarily due to deposits provided by the AAS acquisition. Time deposits decreased $471.4 million as higher costing time deposits were run off.

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


		September 30, 2021				June 30, 2021					March 31, 2022				June 30, 2021
(Dollars in thousands)	(Dollars in thousands)	Amount		Rate1		Amount		Rate1		(Dollars in thousands)	Amount		Rate1		Amount		Rate1
Non-interest bearing	Non-interest bearing	$	3,632,521	—	%	$	2,474,424	—	%	Non-interest bearing	$	4,135,278	—	%	$	2,474,424	—	%
Interest-bearing:
Interest bearing:										Interest bearing:
Demand	Demand	3,582,826		0.14	%	3,369,845		0.15	%	Demand	4,247,543		0.19	%	3,369,845		0.15	%
Savings	Savings	3,151,651		0.22	%	3,458,687		0.21	%	Savings	3,308,736		0.23	%	3,458,687		0.21	%
Total interest-bearing demand and savings	Total interest-bearing demand and savings	6,734,477		0.18	%	6,828,532		0.18	%	Total interest-bearing demand and savings	7,556,279		0.21	%	6,828,532		0.18	%
Time deposits:	Time deposits:									Time deposits:
$250 and under2	$250 and under2	962,782		1.31	%	1,070,139		1.30	%	$250 and under2	726,161		1.19	%	1,070,139		1.30	%
Greater than $250	Greater than $250	417,662		0.54	%	442,702		1.03	%	Greater than $250	315,284		0.61	%	442,702		1.03	%
Total time deposits	Total time deposits	1,380,444		1.08	%	1,512,841		1.22	%	Total time deposits	1,041,445		1.02	%	1,512,841		1.22	%
Total interest bearing2	Total interest bearing2	8,114,921		0.33	%	8,341,373		0.37	%	Total interest bearing2	8,597,724		0.31	%	8,341,373		0.37	%
Total deposits	Total deposits	$	11,747,442	0.23	%	$	10,815,797	0.29	%	Total deposits	$	12,733,002	0.21	%	$	10,815,797	0.29	%

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

~~Table of Contents~~

2The total ~~interest-bearing~~interest bearing includes brokered deposits of ~~$704.3~~$803.0 million and $621.4 million as of ~~September 30, 2021~~March 31, 2022 and June 30, 2021, respectively, of which ~~$370.2~~$250.0 million and $380.0 million, respectively, are time deposits classified as $250 and ~~under~~.under.

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

September 30, 2021 June 30, 2021 September 30, 2020
Non-interest bearing prepaid and other accounts 38,725 36,726 2,887,751
Interest-bearing checking and savings accounts 342,860 336,068 314,774
Time deposits 11,082 12,815 16,594
Total number of accounts 392,667 385,609 3,219,119


	March 31, 2022	June 30, 2021	March 31, 2021
Non-interest bearing, prepaid and other	40,958	36,726	33,442
Checking and savings accounts	344,176	336,068	326,536
Time deposits	9,313	12,815	14,430
Total number of deposit accounts	394,447	385,609	374,408

Our non-interest bearing, prepaid and other accounts contained two omnibus accounts that when condensed for regulatory reporting purposes result in 29,317 accounts at September 30, 2020. The decrease in the number of accounts is the result of the termination of our third-party prepaid card relationships, such as H&R Block, due to the reduction of our interchange fees effective July 1, 2020 as a result of the Durbin Amendment.

Borrowings

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

September 30, 2021 June 30, 2021 September 30, 2020
(Dollars in thousands) Balance Weighted Average Rate Balance Weighted Average Rate Balance Weighted Average Rate
FHLB Advances $ 157,500 2.29 % $ 353,500 1.18 % $ 242,500 2.22 %
Borrowings, subordinated notes and debentures 255,896 4.05 % 221,358 4.68 % 453,843 3.14 %
Total borrowings $ 413,396 3.38 % $ 574,858 0.73 % $ 696,343 2.82 %
Weighted average cost of borrowings during the quarter 2.85 % 2.93 % 2.30 %
Borrowings as a percent of total assets 2.77 % 4.03 % 5.20 %


	March 31, 2022				June 30, 2021				March 31, 2021
(Dollars in thousands)	Balance		Weighted Average Rate		Balance		Weighted Average Rate		Balance		Weighted Average Rate

FHLB Advances	$152,500		2.30	%	$353,500		1.18	%	$172,500		2.26	%
Borrowings, subordinated notes and debentures	381,682		4.54	%	221,358		4.68 %		365,753		3.23	%
Total borrowings	$534,182		3.90	%	$574,858		2.53	%	$538,253		2.92	%

Weighted average cost of borrowings during the quarter	2.44	%			2.93	%			3.63	%
Borrowings as a percent of total assets	3.32	%			4.03	%			3.63	%

At ~~September 30, 2021,~~March 31, 2022, total borrowings amounted to ~~$413.4~~$534.2 million, down ~~$161.5~~$40.7 million, or ~~28.09%~~7.1%, from June 30, 2021 and down ~~$282.9~~$4.1 million or ~~40.63%~~0.8% from ~~September 30, 2020.~~March 31, 2021. Borrowings as a percent of total assets were ~~2.8%~~3.32%, ~~4.0%~~4.03% and ~~5.2%~~3.63% at ~~September 30, 2021,~~March 31, 2022, June 30, 2021 and ~~September 30, 2020,~~March 31, 2021, respectively. Weighted average cost of borrowings during the quarter were ~~2.85%~~2.44%, 2.93% and ~~2.30%~~3.63% for the quarters ended ~~September 30, 2021,~~March 31, 2022, June 30, 2021 and ~~September 30, 2020,~~March 31, 2021, respectively.

Table of Contents

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~~purchase of ~~loans~~single family and multifamily mortgages and to provide us with interest rate risk protection should rates rise.

Stockholders’ Equity

Stockholders’ equity increased ~~$57.7~~$184.6 million to ~~$1,458.6~~$1,585.6 million at ~~September 30, 2021~~March 31, 2022 compared to $1,400.9 million at June 30, 2021. The increase was the result of our net income for the ~~three~~nine months ended ~~September 30, 2021~~March 31, 2022 of ~~$60.2~~$182.8 million, stock compensation expense of $6.0 million, partially offset by ~~stock compensation expense and restricted stock units vesting which combined for~~ a ~~decrease of $2.0 million and a $0.5~~$4.1 million decrease in other comprehensive income, net of tax.

During the three and nine months ended ~~September 30, 2021,~~March 31, 2022, the Company did not repurchase any common stock shares. The Company has $52.8 million remaining under the Board authorized stock repurchase program.

~~Table of Contents~~

~~LIQUIDITY~~Securities Business

~~Cash flow information is as follows:~~

For the Three Months Ended
September 30,
(Dollars in thousands) 2021 2020
Operating Activities $ (133,441) $ 66,291
Investing Activities $ (398,948) $ (316,103)
Financing Activities $ 764,046 $ (578,546)

~~During~~For the three months ended ~~September 30, 2021, we~~March 31, 2022, our Securities Business segment had ~~net cash outflows from operating activities~~a loss before taxes of ~~$133.4~~$1.3 million compared to ~~inflows~~a loss before taxes of ~~$66.3~~$1.1 million for the three months ended ~~September 30, 2020, primarily due~~March 31, 2021. For the nine months ended March 31, 2022, our Securities Business segment had a loss before taxes of $1.9 million compared to ~~net~~a loss before taxes of $2.2 million for the nine months ended March 31, 2021.

Net interest income for ~~each period. Net operating cash inflows and outflows fluctuate primarily due~~the three months ended March 31, 2022, decreased $0.5 million to $3.4 million compared to the ~~timing~~three months ended March 31, 2021. Net interest income for the nine months ended March 31, 2022 increased $1.1 million to $14.1 million compared to the nine months ended March 31, 2021. The changes were primarily a result of fluctuations in the ~~following: originations~~average interest-earning balance of ~~loans held for sale, proceeds from loan sales,~~ securities borrowed and ~~loaned,~~margin lending. In the Securities Business, interest is earned through margin loan balances, securities borrowed, and ~~customer, broker-dealer~~cash deposit balances. Interest expense is incurred from cash borrowed through bank lines and securities lending.

Non-interest income during the three months ended March 31, 2022, increased $7.2 million to $15.6 million compared to the three months ended March 31, 2021. The increases were primarily $7.7 million attributable to the addition of AAS custody and mutual funds fees, an increase of $2.3 million in fees earned on FDIC insured bank deposits, partially offset by a decrease of $1.8 million in correspondent fees, and a decrease of $1.2 million of clearing ~~receivables~~ and ~~payables,~~custodial related fees. Non-interest income during the nine months ended March 31, 2022 increased $24.4 million to $45.2 million compared to the nine months ended March 31, 2021. The increases were primarily $21.1 million attributable to the addition of AAS custody and ~~changes~~mutual funds fees, an increase of $4.3 million in ~~other assets~~fees earned on FDIC insured bank deposits, partially offset by a decrease of $0.9 million in correspondent fees, a decrease of $0.6 million of clearing and ~~payables were the primary drivers.~~custodial related fees.

~~Net cash outflows from investing activities totaled $398.9~~Non-interest expense increased $7.0 million to $20.2 million for the three months ended ~~September 30, 2021, while outflows totaled $316.1~~March 31, 2022 from the $13.3 million for the three months ended ~~September 30, 2020.~~March 31, 2021. The increase ~~in outflows~~ was primarily ~~due~~related to ~~increased originations~~an increase of ~~loans partially offset by increased repayments on loans~~$3.0 million in salaries and related expenses related to staffing and the ~~$54.6~~acquisition of AAS, an increase of $1.2 million depreciation and amortization expense, an increase of $0.9 million in occupancy and equipment, an increase of $0.7 million in data processing. Non-interest expense increased $25.2 million to $61.2 million for the nine months ended March 31, 2022, from $35.9 million for the nine months ended March 31, 2021. The increase was primarily related to an increase of $12.1 million in salaries and related expenses related to staffing and the acquisition of AAS, an increase of $3.3 million in broker-dealer clearing charges, an increase of $2.9 million depreciation and amortization expense, an increase of $2.5 million in data processing, an increase of $2.0 million occupancy and equipment expense, and an increase of $1.0 million advertising and promotional expense. The increases were primarily the result of the addition of AAS.

~~Net cash inflows from financing activities totaled $764.0 million~~Selected information concerning the Securities segment follows as of and for the three months ended September 30, 2021, compared to net cash outflows from financing activities of $578.5 million for the three months ended September 30, 2020. The primary driver behind the increase in net cash inflows was increased deposits provided by the acquisition of AAS for the three months ended September 30, 2021.ended:

During the three months ended September 30, 2021, the Bank could borrow up to 40.0% 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, 2021, the Company had $1,709.3 million available immediately and $3,388.7 million available with additional collateral. At September 30, 2021, we also had two unsecured federal funds purchase lines with two different banks totaling $175.0 million, under which no borrowings were outstanding.

The Bank has the ability to borrow short-term from the Federal Reserve Bank of San Francisco Discount Window. At September 30, 2021, the Bank did not have any borrowings outstanding and the amount available from this source was $2,024.3 million. The credit line is collateralized by consumer loans and mortgage-backed securities.

Axos Clearing has a total of $99.4 million uncommitted secured lines of credit available for borrowing as needed. As of September 30, 2021, there was $70.6 million outstanding. These credit facilities bear interest at rates based on the Federal Funds rate and are due upon demand.

Axos Clearing has a $50 million committed unsecured line of credit available for limited purpose borrowing. As of September 30, 2021, there was $0 million outstanding. This credit facility bears interest at rates based on the Federal Funds rate and are due upon demand.

We believe our liquidity sources to be stable and adequate for our anticipated needs and contingencies for the next 12 months and beyond. We believe we have the ability to increase our level of deposits and borrowings to address our liquidity needs for the foreseeable future.

~~OFF-BALANCE SHEET COMMITMENTS~~

At September 30, 2021, we had commitments to originate loans with an aggregate outstanding principal balance of $1,068.7 million, and commitments to sell loans with an aggregate outstanding principal balance of $56.1 million. We have no commitments to purchase loans, investment securities or any other unused lines of credit.


	March 31,
(Dollars in thousands)	2022			2021
Compensation as a % of net revenue	36.7		%	32.4		%
FDIC insured program balances (end of period)	$	824,494		$	794,614
Customer margin balances (end of period)	$	294,983		$	310,695
Customer funds on deposit, including short credits (end of period)	$	250,966		$	294,903

Clearing:
Total tickets	1,495,617			1,998,293
Correspondents (end of period)	68			64

Securities lending:
Interest-earning assets – stock borrowed (end of period)	$	274,644		$	543,538
Interest-bearing liabilities – stock loaned (end of period)	$	447,748		$	649,837

Table of Contents

~~CAPITAL RESOURCES AND REQUIREMENTS~~FINANCIAL CONDITION

~~Our Company~~Balance Sheet Analysis

Total assets increased $1.8 billion, or 12.7%, to $16.1 billion, as of March 31, 2022, up from $14.3 billion at June 30, 2021. The increase in total assets was mainly due to an increase of $1.7 billion in net loans held for investment, an increase of $211.5 million in cash and cash equivalents, and an increase of $140.7 million in customer, broker-dealer and clearing receivables, partially offset by a decrease of $344.4 million in securities borrowed. Total liabilities increased $1.6 billion, primarily due to growth in deposits of $1.9 billion, partially offset by a decrease of $201.0 million in advances from the FHLB and a decrease of $281.2 million in securities loaned.

Loans

Net loans held for investment increased 14.7% to $13.1 billion as of March 31, 2022 from $11.4 billion at June 30, 2021. The increase in the loan portfolio was primarily due to growth in demand for commercial real estate and C&I loans.

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


	March 31, 2022				June 30, 2021
(Dollars in thousands)	Amount		Percent		Amount		Percent
Single Family - Mortgage & Warehouse	$	3,972,103	30.0	%	$	4,359,472	37.8	%
Multifamily and Commercial Mortgage	2,662,517		20.1	%	2,470,454		21.4	%
Commercial Real Estate	4,293,032		32.5	%	3,180,453		27.5	%
Commercial & Industrial - Non-RE	1,780,545		13.4	%	1,123,869		9.7	%
Auto & Consumer	521,936		3.9	%	362,180		3.1	%
Other	16,125		0.1	%	58,316		0.5	%
Total gross loans	13,246,258		100.0	%	11,554,744		100.0	%
Allowance for credit losses - loans	(143,372)				(132,958)
Unaccreted discounts and loan fees	(9,283)				(6,972)
Total net loans	$	13,093,603			$	11,414,814

The Bank originates some single family interest only loans with terms that include repayments that are ~~subject~~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 ~~regulatory capital adequacy requirements promulgated~~borrow at LTVs that are lower than standard amortizing ARM loans and by ~~federal bank regulatory agencies. Failure by our Company or~~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. Adverse trends reflected in the Company’s delinquency statistics, grading and classification of interest only loans would be reported to meet minimum capital requirements could result in certain mandatory and discretionary actions by regulators that could have a material adverse effect on our unaudited condensed consolidated financial statements. The Federal Reserve establishes capital requirements for our Companymanagement and the ~~OCC has similar requirements for our Bank. The following tables present regulatory capital information for our~~Board of Directors. As of March 31, 2022, the Company and Bank. Information presented for September 30, 2021, reflects the Basel III capital requirements that became effective January 1, 2015 for both our Company and 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 measureshad $1.1 billion 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 maintain minimum ratios of core 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, 2021, 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, 2021 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 elected the CECL 5-year transition guidance for calculating regulatory capital ratios and the September 30, 2021 ratios include this election. This guidance allows an entity to add back to capital 100% of the capital impact from the day one CECL transition adjustment and 25% of subsequent increases to the allowance for credit losses through June 30, 2023. This cumulative amount will then be phased out of regulatory capital over the next three years.

~~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 millions) September 30, 2021 June 30,
2021 September 30, 2021 June 30,
2021
Regulatory Capital:
Tier 1 $ 1,320 $ 1,309 $ 1,313 $ 1,263
Common equity tier 1 $ 1,320 $ 1,309 $ 1,313 $ 1,263
Total capital (to risk-weighted assets) $ 1,603 $ 1,588 $ 1,413 $ 1,358
Assets:
Average adjusted $ 14,365 $ 14,851 $ 12,952 $ 13,360
Total risk-weighted $ 12,231 $ 11,523 $ 11,043 $ 10,283
Regulatory Capital Ratios:
Tier 1 leverage (core) capital to adjusted average assets 9.19 % 8.82 % 10.14 % 9.45 % 5.00 % 4.00 %
Common equity tier 1 capital (to risk-weighted assets) 10.79 % 11.36 % 11.89 % 12.28 % 6.50 % 4.50 %
Tier 1 capital (to risk-weighted assets) 10.79 % 11.36 % 11.89 % 12.28 % 8.00 % 6.00 %
Total capital (to risk-weighted assets) 13.10 % 13.78 % 12.80 % 13.21 % 10.00 % 8.00 %

Basel III implemented a requirement for 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, 2021, our Company and Bank are 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.interest only mortgage loans.

Table of Contents

Asset Quality and Allowance for Loan and Lease Losses

Non-performing Assets

Non-performing loans are comprised of loans past due 90 days or more on nonaccrual status and other nonaccrual loans. Non-performing assets include non-performing loans plus other real estate owned and repossessed vehicles. At March 31, 2022, our non-performing loans totaled $138.8 million, or 1.05% of total gross loans and our non-performing loans and foreclosed assets or “non-performing assets” totaled $139.3 million, or 0.87% of total assets.

Non-performing assets consisted of the following as of the dates indicated:


(Dollars in thousands)	March 31, 2022			June 30, 2021			Inc (Dec)
Non-performing assets:
Non-accrual loans and leases:
Single Family - Mortgage & Warehouse	$	113,317		$	105,708		$	7,609
Multifamily and Commercial Mortgage	9,667			20,428			(10,761)
Commercial Real Estate	14,952			15,839			(887)
Commercial & Industrial - Non-RE	—			2,942			(2,942)
Auto & Consumer	446			278			168
Other	372			—			372
Total non-performing loans	138,754			145,195			(6,441)
Foreclosed real estate	—			6,547			(6,547)
Repossessed—Auto and RV	564			235			329
Total non-performing assets	$	139,318		$	151,977		$	(12,659)
Total non-performing loans as a percentage of total loans	1.05		%	1.26		%	(0.21)		%
Total non-performing assets as a percentage of total assets	0.87		%	1.07		%	(0.20)		%

Total non-performing assets decreased from $152.0 million at June 30, 2021 to $139.3 million at March 31, 2022. The decrease in non-performing assets of approximately $12.7 million, was primarily attributable to resolutions of multifamily, C&I - non-RE, and foreclosed real estate in response to improved macro economic factors. Non-performing single-family loans increased by $7.6 million. The Company ended COVID-19 related forbearance for all single family mortgage borrowers during the quarter ended September 30, 2020. Any forbearance granted out of COVID-19 was for six months or less. The weighted-average LTV of the non-performing single family mortgage loans was 57.2% as of March 31, 2022.

The Bank had no performing troubled debt restructurings as of March 31, 2022 and June 30, 2021. A troubled debt restructuring is a concession made to a borrower experiencing financial difficulties, typically permanent or temporary modifications of principal and interest payments or an extension of maturity dates. When a loan is delinquent and classified as a troubled debt restructuring, no interest is accrued until the borrower demonstrates over time (typically six months) that it can make payments. When a loan is considered a troubled debt restructuring and is on nonaccrual, it is considered non-performing and included in the table above.

Table of Contents

Allowance for Credit Losses - Loans

On July 1, 2020, the Company adopted ASC 326. The update replaces the historical incurred loss model to a current expected loss model, resulting, generally, in earlier recognition of loss. Refer to Note 1 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for greater detail on the accounting adoption along with detail of the processes and approaches involved in determining the allowance for credit losses under the new guidance.

The following table reflects management’s allocation of the allowance for credit losses - loans by loan category and the ratio of each loan category to total loans as of the dates indicated:


	March 31, 2022				June 30, 2021
(Dollars in thousands)	Amount of Allowance		Allocation as a % of Allowance		Amount of Allowance		Allocation as a % of Allowance
Single Family Real Estate	$	21,789	15.2	%	$	26,604	20.0	%
Multifamily Real Estate	13,818		9.7	%	13,146		9.9	%
Commercial Real Estate	69,829		48.7	%	57,928		43.6	%
Commercial and Industrial - Non-RE	26,268		18.3	%	28,460		21.4	%
Consumer and Auto	11,623		8.1	%	6,519		4.9	%
Other	45		—	%	301		0.2	%
Total	$	143,372	100.0	%	$	132,958	100.0	%

The provision for credit losses was $4.5 million for the three months ended March 31, 2022 compared to $2.7 million for the three months ended March 31, 2021. The provision for credit losses was $12.5 million for the nine months ended March 31, 2022 compared to $22.5 million for the nine months ended March 31, 2021. The increase in the provision for the three months ended March 31, 2022 was due to growth in the loan portfolio. The decrease in the provision for the nine months ended March 31, 2022 was due to favorable changes in economic and business conditions resulting from reduced levels of disruptions from the COVID-19 pandemic between March 31, 2021 and March 31, 2022, partially offset by loan growth and changes in loan mix. We believe that the lower average LTV in the Bank’s mortgage loan portfolio will continue to result in future lower average mortgage loan charge-offs when compared to many other comparable banks. The resolution of the Bank’s 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 $229.9 million as of March 31, 2022, compared with $189.3 million at June 30, 2021. During the nine months ended March 31, 2022, we purchased securities for $107.3 million and received principal repayments of approximately $59.5 million in our available-for-sale portfolio. The remainder of the change for the available-for-sale portfolio is attributable to accretion and other activities.

Table of Contents

Deposits

Deposits increased a net $1.9 billion, or 17.7%, to $12.7 billion at March 31, 2022, from $10.8 billion at June 30, 2021. Non-interest bearing deposits increased $1.7 billion, or 67.1%, to $4.1 billion at March 31, 2022, from June 30, 2021, primarily due to deposits provided by the AAS acquisition. Time deposits decreased $471.4 million as higher costing time deposits were run off.

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


	March 31, 2022				June 30, 2021
(Dollars in thousands)	Amount		Rate1		Amount		Rate1
Non-interest bearing	$	4,135,278	—	%	$	2,474,424	—	%
Interest bearing:
Demand	4,247,543		0.19	%	3,369,845		0.15	%
Savings	3,308,736		0.23	%	3,458,687		0.21	%
Total interest-bearing demand and savings	7,556,279		0.21	%	6,828,532		0.18	%
Time deposits:
$250 and under2	726,161		1.19	%	1,070,139		1.30	%
Greater than $250	315,284		0.61	%	442,702		1.03	%
Total time deposits	1,041,445		1.02	%	1,512,841		1.22	%
Total interest bearing2	8,597,724		0.31	%	8,341,373		0.37	%
Total deposits	$	12,733,002	0.21	%	$	10,815,797	0.29	%

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

2The total interest bearing includes brokered deposits of $803.0 million and $621.4 million as of March 31, 2022 and June 30, 2021, respectively, of which $250.0 million and $380.0 million, respectively, are time deposits classified as $250 and under.

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


	March 31, 2022	June 30, 2021	March 31, 2021
Non-interest bearing, prepaid and other	40,958	36,726	33,442
Checking and savings accounts	344,176	336,068	326,536
Time deposits	9,313	12,815	14,430
Total number of deposit accounts	394,447	385,609	374,408

Borrowings

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


	March 31, 2022				June 30, 2021				March 31, 2021
(Dollars in thousands)	Balance		Weighted Average Rate		Balance		Weighted Average Rate		Balance		Weighted Average Rate

FHLB Advances	$152,500		2.30	%	$353,500		1.18	%	$172,500		2.26	%
Borrowings, subordinated notes and debentures	381,682		4.54	%	221,358		4.68 %		365,753		3.23	%
Total borrowings	$534,182		3.90	%	$574,858		2.53	%	$538,253		2.92	%

Weighted average cost of borrowings during the quarter	2.44	%			2.93	%			3.63	%
Borrowings as a percent of total assets	3.32	%			4.03	%			3.63	%

At March 31, 2022, total borrowings amounted to $534.2 million, down $40.7 million, or 7.1%, from June 30, 2021 and down $4.1 million or 0.8% from March 31, 2021. Borrowings as a percent of total assets were 3.32%, 4.03% and 3.63% at March 31, 2022, June 30, 2021 and March 31, 2021, respectively. Weighted average cost of borrowings during the quarter were 2.44%, 2.93% and 3.63% for the quarters ended March 31, 2022, June 30, 2021 and March 31, 2021, respectively.

Table of Contents

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 purchase of single family and multifamily mortgages and to provide us with interest rate risk protection should rates rise.

Stockholders’ Equity

Stockholders’ equity increased $184.6 million to $1,585.6 million at March 31, 2022 compared to $1,400.9 million at June 30, 2021. The increase was the result of our net income for the nine months ended March 31, 2022 of $182.8 million, stock compensation expense of $6.0 million, partially offset by a $4.1 million decrease in other comprehensive income, net of tax.

During the three and nine months ended March 31, 2022, the Company did not repurchase any common stock shares. The Company has $52.8 million remaining under the Board authorized stock repurchase program.

~~Securities Business~~

Pursuant to the net capital requirements of the Securities Exchange Act of 1934, as amended (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, 2021 June 30, 2021
Net capital $ 39,663 $ 35,950
Excess Capital $ 31,435 $ 27,904
Net capital as a percentage of aggregate debit items 9.64 % 8.94 %
Net capital in excess of 5% aggregate debit items $ 19,092 $ 15,836

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, 2021, the Company had a deposit requirement of $241.0 million and maintained a deposit of $214.3 million. On October 1, 2021, the company made a deposit of $31.0 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, 2021, the Company had a deposit requirement of $47.8 million and maintained a deposit of $55.0 million. On October 1, 2021, the Company made a withdrawal in the amount of $6.9 million.

~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

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.

~~Table of Contents~~

~~Banking Business~~

The following table sets forth the amounts of interest earning assets and interest bearing liabilities that were outstanding at September 30, 2021 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, 2021
(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 $ 966,301 $ — $ — $ — $ 966,301
Securities1
132,274 1,684 12,025 14,957 160,940
Stock of the FHLB, at cost 17,250 — — — 17,250
Loans—net of allowance for credit loss 7,618,288 1,504,579 2,806,303 46,635 11,975,805
Loans held for sale 45,293 — — — 45,293
Total interest-earning assets 8,779,406 1,506,263 2,818,328 61,592 13,165,589
Non-interest earning assets — — — — 306,080
Total assets $ 8,779,406 $ 1,506,263 $ 2,818,328 $ 61,592 $ 13,471,669
Interest-bearing liabilities:
Interest-bearing deposits $ 6,154,180 $ 1,513,649 $ 486,745 $ 171 $ 8,154,745
Advances from the FHLB 5,000 40,000 52,500 60,000 157,500
Borrowings, subordinated notes and debentures 126,088 — — 14,000 140,088
Total interest-bearing liabilities 6,285,268 1,553,649 539,245 74,171 8,452,333
Other non-interest-bearing liabilities — — — — 3,672,639
Stockholders’ equity — — — — 1,346,697
Total liabilities and equity $ 6,285,268 $ 1,553,649 $ 539,245 $ 74,171 $ 13,471,669
Net interest rate sensitivity gap $ 2,494,138 $ (47,386) $ 2,279,083 $ (12,579) $ 4,713,256
Cumulative gap $ 2,494,138 $ 2,446,752 $ 4,725,835 $ 4,713,256 $ 4,713,256
Net interest rate sensitivity gap—as a % of total interest earning assets 18.94 % (0.36) % 17.31 % (0.10) % 35.80 %
Cumulative gap—as % of total interest earning assets 18.94 % 18.58 % 35.90 % 35.80 % 35.80 %

1 ~~Comprised of agency and non-agency mortgage-backed securities, municipal securities and other non-agency debt securities, which are classified as available-for-sale.~~

The above table provides an approximation of the projected re-pricing of assets and liabilities at September 30, 2021 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.

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.

~~Table of Contents~~

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 the Bank assumes no growth in the balance sheet other than for retained earnings:

As of September 30, 2021
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 $ 585,772 10.6 % $ 570,219 11.7 %
Base $ 529,586 — % $ 510,581 — %
Down 100 basis points $ 519,007 (2.0) % $ 492,226 (3.6) %

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 current treasury and LIBOR yield curves. For rising interest rate scenarios, the base market interest rate forecast was increased by 100, 200 and 300 basis points. For falling interest rate scenarios, we used a 100 basis point decrease due to limitations inherent in the current rate environment.

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

As of September 30, 2021
(Dollars in thousands) Net
Present Value Percentage Change from Base Net
Present
Value as a
Percentage
of Assets
Up 300 basis points $ 1,645,754 4.6 % 12.2 %
Up 200 basis points $ 1,670,166 6.2 % 12.3 %
Up 100 basis points $ 1,633,809 3.9 % 11.9 %
Base $ 1,572,806 — % 11.4 %
Down 100 basis points $ 1,370,455 (12.9) % 9.8 %

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

For the three months ended March 31, 2022, our Securities Business segment had a loss before taxes of $1.3 million compared to a loss before taxes of $1.1 million for the three months ended March 31, 2021. For the nine months ended March 31, 2022, our Securities Business segment had a loss before taxes of $1.9 million compared to a loss before taxes of $2.2 million for the nine months ended March 31, 2021.

Net interest income for the three months ended March 31, 2022, decreased $0.5 million to $3.4 million compared to the three months ended March 31, 2021. Net interest income for the nine months ended March 31, 2022 increased $1.1 million to $14.1 million compared to the nine months ended March 31, 2021. The changes were primarily a result of fluctuations in the average interest-earning balance of securities borrowed and margin lending. In the Securities Business, interest is earned through margin loan balances, securities borrowed, and cash deposit balances. Interest expense is incurred from cash borrowed through bank lines and securities lending.

Non-interest income during the three months ended March 31, 2022, increased $7.2 million to $15.6 million compared to the three months ended March 31, 2021. The increases were primarily $7.7 million attributable to the addition of AAS custody and mutual funds fees, an increase of $2.3 million in fees earned on FDIC insured bank deposits, partially offset by a decrease of $1.8 million in correspondent fees, and a decrease of $1.2 million of clearing and custodial related fees. Non-interest income during the nine months ended March 31, 2022 increased $24.4 million to $45.2 million compared to the nine months ended March 31, 2021. The increases were primarily $21.1 million attributable to the addition of AAS custody and mutual funds fees, an increase of $4.3 million in fees earned on FDIC insured bank deposits, partially offset by a decrease of $0.9 million in correspondent fees, a decrease of $0.6 million of clearing and custodial related fees.

Non-interest expense increased $7.0 million to $20.2 million for the three months ended March 31, 2022 from the $13.3 million for the three months ended March 31, 2021. The increase was primarily related to an increase of $3.0 million in salaries and related expenses related to staffing and the acquisition of AAS, an increase of $1.2 million depreciation and amortization expense, an increase of $0.9 million in occupancy and equipment, an increase of $0.7 million in data processing. Non-interest expense increased $25.2 million to $61.2 million for the nine months ended March 31, 2022, from $35.9 million for the nine months ended March 31, 2021. The increase was primarily related to an increase of $12.1 million in salaries and related expenses related to staffing and the acquisition of AAS, an increase of $3.3 million in broker-dealer clearing charges, an increase of $2.9 million depreciation and amortization expense, an increase of $2.5 million in data processing, an increase of $2.0 million occupancy and equipment expense, and an increase of $1.0 million advertising and promotional expense. The increases were primarily the result of the addition of AAS.

Selected information concerning the Securities segment follows as of and for the three months ended:


	March 31,
(Dollars in thousands)	2022			2021
Compensation as a % of net revenue	36.7		%	32.4		%
FDIC insured program balances (end of period)	$	824,494		$	794,614
Customer margin balances (end of period)	$	294,983		$	310,695
Customer funds on deposit, including short credits (end of period)	$	250,966		$	294,903

Clearing:
Total tickets	1,495,617			1,998,293
Correspondents (end of period)	68			64

Securities lending:
Interest-earning assets – stock borrowed (end of period)	$	274,644		$	543,538
Interest-bearing liabilities – stock loaned (end of period)	$	447,748		$	649,837

Table of Contents

FINANCIAL CONDITION

Balance Sheet Analysis

Loans

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


	March 31, 2022				June 30, 2021
(Dollars in thousands)	Amount		Percent		Amount		Percent
Single Family - Mortgage & Warehouse	$	3,972,103	30.0	%	$	4,359,472	37.8	%
Multifamily and Commercial Mortgage	2,662,517		20.1	%	2,470,454		21.4	%
Commercial Real Estate	4,293,032		32.5	%	3,180,453		27.5	%
Commercial & Industrial - Non-RE	1,780,545		13.4	%	1,123,869		9.7	%
Auto & Consumer	521,936		3.9	%	362,180		3.1	%
Other	16,125		0.1	%	58,316		0.5	%
Total gross loans	13,246,258		100.0	%	11,554,744		100.0	%
Allowance for credit losses - loans	(143,372)				(132,958)
Unaccreted discounts and loan fees	(9,283)				(6,972)
Total net loans	$	13,093,603			$	11,414,814

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. 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 March 31, 2022, the Company had $1.1 billion of interest only mortgage loans.

Table of Contents

Asset Quality and Allowance for Loan and Lease Losses

Non-performing Assets

Non-performing loans are comprised of loans past due 90 days or more on nonaccrual status and other nonaccrual loans. Non-performing assets include non-performing loans plus other real estate owned and repossessed vehicles. At March 31, 2022, our non-performing loans totaled $138.8 million, or 1.05% of total gross loans and our non-performing loans and foreclosed assets or “non-performing assets” totaled $139.3 million, or 0.87% of total assets.

Non-performing assets consisted of the following as of the dates indicated:


(Dollars in thousands)	March 31, 2022			June 30, 2021			Inc (Dec)
Non-performing assets:
Non-accrual loans and leases:
Single Family - Mortgage & Warehouse	$	113,317		$	105,708		$	7,609
Multifamily and Commercial Mortgage	9,667			20,428			(10,761)
Commercial Real Estate	14,952			15,839			(887)
Commercial & Industrial - Non-RE	—			2,942			(2,942)
Auto & Consumer	446			278			168
Other	372			—			372
Total non-performing loans	138,754			145,195			(6,441)
Foreclosed real estate	—			6,547			(6,547)
Repossessed—Auto and RV	564			235			329
Total non-performing assets	$	139,318		$	151,977		$	(12,659)
Total non-performing loans as a percentage of total loans	1.05		%	1.26		%	(0.21)		%
Total non-performing assets as a percentage of total assets	0.87		%	1.07		%	(0.20)		%

Table of Contents

Allowance for Credit Losses - Loans

On July 1, 2020, the Company adopted ASC 326. The update replaces the historical incurred loss model to a current expected loss model, resulting, generally, in earlier recognition of loss. Refer to Note 1 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for greater detail on the accounting adoption along with detail of the processes and approaches involved in determining the allowance for credit losses under the new guidance.

The following table reflects management’s allocation of the allowance for credit losses - loans by loan category and the ratio of each loan category to total loans as of the dates indicated:


	March 31, 2022				June 30, 2021
(Dollars in thousands)	Amount of Allowance		Allocation as a % of Allowance		Amount of Allowance		Allocation as a % of Allowance
Single Family Real Estate	$	21,789	15.2	%	$	26,604	20.0	%
Multifamily Real Estate	13,818		9.7	%	13,146		9.9	%
Commercial Real Estate	69,829		48.7	%	57,928		43.6	%
Commercial and Industrial - Non-RE	26,268		18.3	%	28,460		21.4	%
Consumer and Auto	11,623		8.1	%	6,519		4.9	%
Other	45		—	%	301		0.2	%
Total	$	143,372	100.0	%	$	132,958	100.0	%

Investment Securities

Table of Contents

Deposits

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


	March 31, 2022				June 30, 2021
(Dollars in thousands)	Amount		Rate1		Amount		Rate1
Non-interest bearing	$	4,135,278	—	%	$	2,474,424	—	%
Interest bearing:
Demand	4,247,543		0.19	%	3,369,845		0.15	%
Savings	3,308,736		0.23	%	3,458,687		0.21	%
Total interest-bearing demand and savings	7,556,279		0.21	%	6,828,532		0.18	%
Time deposits:
$250 and under2	726,161		1.19	%	1,070,139		1.30	%
Greater than $250	315,284		0.61	%	442,702		1.03	%
Total time deposits	1,041,445		1.02	%	1,512,841		1.22	%
Total interest bearing2	8,597,724		0.31	%	8,341,373		0.37	%
Total deposits	$	12,733,002	0.21	%	$	10,815,797	0.29	%

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

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


	March 31, 2022	June 30, 2021	March 31, 2021
Non-interest bearing, prepaid and other	40,958	36,726	33,442
Checking and savings accounts	344,176	336,068	326,536
Time deposits	9,313	12,815	14,430
Total number of deposit accounts	394,447	385,609	374,408

Borrowings

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


	March 31, 2022				June 30, 2021				March 31, 2021
(Dollars in thousands)	Balance		Weighted Average Rate		Balance		Weighted Average Rate		Balance		Weighted Average Rate

FHLB Advances	$152,500		2.30	%	$353,500		1.18	%	$172,500		2.26	%
Borrowings, subordinated notes and debentures	381,682		4.54	%	221,358		4.68 %		365,753		3.23	%
Total borrowings	$534,182		3.90	%	$574,858		2.53	%	$538,253		2.92	%

Weighted average cost of borrowings during the quarter	2.44	%			2.93	%			3.63	%
Borrowings as a percent of total assets	3.32	%			4.03	%			3.63	%

Table of Contents

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 purchase of single family and multifamily mortgages and to provide us with interest rate risk protection should rates rise.

Stockholders’ Equity

LIQUIDITY

Cash flow information is as follows:


	For the Nine Months Ended
	March 31,
(Dollars in thousands)	2022		2021
Operating Activities	$	65,210	$	312,727
Investing Activities	$	(1,719,834)	$	(1,126,045)
Financing Activities	$	1,866,161	$	305,754

During the nine months ended March 31, 2022, we had net cash inflows from operating activities of $65.2 million compared to inflows of $312.7 million for the nine months ended March 31, 2021, primarily due to net income for each period. 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 were the primary drivers.

Net cash outflows from investing activities totaled $1,719.8 million for the nine months ended March 31, 2022, while outflows totaled $1,126.0 million for the nine months ended March 31, 2021. The increase in outflows was primarily due to increased originations of loans partially offset by increased repayments on loans and the $54.8 million acquisition of AAS.

Net cash inflows from financing activities totaled $1,866.2 million for the nine months ended March 31, 2022, compared to net cash outflows from financing activities of $305.8 million for the nine months ended March 31, 2021. The primary driver behind the increase in net cash inflows was increased deposits provided in part, by the acquisition of AAS and by the net proceeds of $148.1 million of subordinated notes in the nine months ended March 31, 2022.

During the nine months ended March 31, 2022, the Bank could borrow up to 40.0% of its total assets from the FHLB. Borrowings are collateralized by the pledge of certain mortgage loans and investment securities to the FHLB. At March 31, 2022, the Company had $1,562.2 million available immediately and $2,783.9 million available with additional collateral. At March 31, 2022, we also had two unsecured federal funds purchase lines with two different banks totaling $175.0 million, under which no borrowings were outstanding.

The Bank has the ability to borrow short-term from the Federal Reserve Bank of San Francisco Discount Window. At March 31, 2022, the Bank did not have any borrowings outstanding and the amount available from this source was $2,800.6 million. The credit line is collateralized by consumer loans and mortgage-backed securities.

Axos Clearing has a total of $170.0 million in uncommitted secured lines of credit for borrowing as needed. As of March 31, 2022, there was $18.0 million outstanding. These credit facilities bear interest at rates based on the Federal Funds rate and are due upon demand.

Axos Clearing has a $75.0 million committed unsecured line of credit available for limited purpose borrowing. As of March 31, 2022, there was $30.0 million outstanding on this credit facility. This credit facility bears interest at rates based on the Federal Funds rate and are due upon demand.

Table of Contents

OFF-BALANCE SHEET COMMITMENTS

At March 31, 2022, we had commitments to originate loans with an aggregate outstanding principal balance of $2,820.3 million, and commitments to sell loans with an aggregate outstanding principal balance of $33.0 million. We have no commitments to purchase loans, investment securities or any other unused lines of credit.

At March 31, 2022 we had a commitment to fund an equity investment measured at fair value of $10 million. At March 31, 2022, no amounts had been funded related to the investment.

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 unaudited condensed consolidated financial statements. The Federal Reserve establishes capital requirements for our Company and the OCC has similar requirements for our Bank. The following tables present regulatory capital information for our Company and Bank. Information presented for March 31, 2022, reflects the Basel III capital requirements that became effective January 1, 2015 for both our Company and 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 maintain minimum ratios of core 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 March 31, 2022, 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 March 31, 2022 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 elected the CECL 5-year transition guidance for calculating regulatory capital ratios and the March 31, 2022 ratios include this election. This guidance allows an entity to add back to capital 100% of the capital impact from the day one CECL transition adjustment and 25% of subsequent increases to the allowance for credit losses through June 30, 2023. This cumulative amount will then be phased out of regulatory capital over the next three years.

Table of Contents

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 millions)	March 31, 2022			June 30, 2021			March 31, 2022			June 30, 2021
Regulatory Capital:
Tier 1	$	1,459		$	1,309		$	1,505		$	1,263
Common equity tier 1	$	1,459		$	1,309		$	1,505		$	1,263
Total capital (to risk-weighted assets)	$	1,898		$	1,588		$	1,611		$	1,358

Assets:
Average adjusted	$	15,477		$	14,851		$	14,319		$	13,360
Total risk-weighted	$	14,267		$	11,523		$	13,162		$	10,283

Regulatory Capital Ratios:
Tier 1 leverage (core) capital to adjusted average assets	9.43		%	8.82		%	10.51		%	9.45		%	5.00	%	4.00	%
Common equity tier 1 capital (to risk-weighted assets)	10.23		%	11.36		%	11.43		%	12.28		%	6.50	%	4.50	%
Tier 1 capital (to risk-weighted assets)	10.23		%	11.36		%	11.43		%	12.28		%	8.00	%	6.00	%
Total capital (to risk-weighted assets)	13.30		%	13.78		%	12.24		%	13.21		%	10.00	%	8.00	%

Basel III implemented a requirement for 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 March 31, 2022, our Company and Bank are 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)	March 31, 2022			June 30, 2021
Net capital	$	39,109		$	35,950
Excess Capital	$	31,612		$	27,904

Net capital as a percentage of aggregate debit items	10.43		%	8.94		%
Net capital in excess of 5% aggregate debit items	$	20,369		$	15,836

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 March 31, 2022, the Company had a deposit requirement of $220.5 million and maintained a deposit of $224.6 million. On April 1, 2022, the company made a deposit of $6.0 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 March 31, 2022, the Company had a deposit requirement of $34.3 million and maintained a deposit of $26.4 million. On January 1, 2022, the Company made a deposit in the amount of $8.9 million.

Table of Contents

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Banking Business

The following table sets forth the amounts of interest earning assets and interest bearing liabilities that were outstanding at March 31, 2022 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
	March 31, 2022
(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	$	973,060		$	—		$	—		$	—		$	973,060
Securities1	219,108			1,465			12,566			19,096			252,235
Stock of the FHLB, at cost	17,250			—			—			—			17,250
Loans—net of allowance for credit loss	8,522,787			1,489,650			3,119,827			67,795			13,200,059
Loans held for sale	30,793			—			—			—			30,793
Total interest-earning assets	9,762,998			1,491,115			3,132,393			86,891			14,473,397
Non-interest earning assets	—			—			—			—			295,239
Total assets	$	9,762,998		$	1,491,115		$	3,132,393		$	86,891		$	14,768,636
Interest-bearing liabilities:
Interest-bearing deposits	$	6,787,066		$	1,635,122		$	328,359		$	—		$	8,750,547

Advances from the FHLB	40,000			22,500			30,000			60,000			152,500

Total interest-bearing liabilities	6,827,066			1,657,622			358,359			60,000			8,903,047
Other non-interest-bearing liabilities	—			—			—			—			4,336,869
Stockholders’ equity	—			—			—			—			1,528,720
Total liabilities and equity	$	6,827,066		$	1,657,622		$	358,359		$	60,000		$	14,768,636
Net interest rate sensitivity gap	$	2,935,932		$	(166,507)		$	2,774,034		$	26,891		$	5,570,350
Cumulative gap	$	2,935,932		$	2,769,425		$	5,543,459		$	5,570,350		$	5,570,350
Net interest rate sensitivity gap—as a % of total interest earning assets	20.29		%	(1.15)		%	19.17		%	0.19		%	38.49		%
Cumulative gap—as % of total interest earning assets	20.29		%	19.13		%	38.30		%	38.49		%	38.49		%

1 Comprised of agency and non-agency mortgage-backed securities, municipal securities and other non-agency debt securities, which are classified as available-for-sale.

The above table provides an approximation of the projected re-pricing of assets and liabilities at March 31, 2022 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.

Table of Contents

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, the Bank assumes no growth in the balance sheet other than for retained earnings:


	As of March 31, 2022
	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	$	659,730	8.7	%	$	680,228	8.3	%
Base	$	606,913	—	%	$	628,221	—	%
Down 100 basis points	$	591,220	(2.6)	%	$	598,604	(4.7)	%

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 current treasury and LIBOR yield curves. For rising interest rate scenarios, the base market interest rate forecast was increased by 100, 200 and 300 basis points. For falling interest rate scenarios, we used a 100 and 200 basis point decrease due to limitations inherent in the current rate environment.

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


	As of March 31, 2022
(Dollars in thousands)	Net Present Value		Percentage Change from Base		Net Present Value as a Percentage of Assets
Up 300 basis points	$	1,707,001	(6.6)	%	11.9	%
Up 200 basis points	$	1,784,651	(2.4)	%	12.3	%
Up 100 basis points	$	1,831,768	0.2	%	12.5	%
Base	$	1,828,358	—	%	12.3	%
Down 100 basis points	$	1,676,314	(8.3)	%	11.2	%

Securities Business

Our Securities Business is exposed to market risk primarily due to its role as a financial intermediary in customer 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. Much 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.

~~At September 30, 2021, Axos Clearing held municipal obligations. These positions were classified as trading securities and had maturities greater than 10 years.~~

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

5055

Table of Contents

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 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk.”

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.

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.

5156

Table of Contents

PART II—OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

The information set forth in Note 89 – “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 business of the Bank. 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 Part 1, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2021. 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, 2021.~~March 31, 2022.


(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
Quarter Ended ~~September 30, 2021~~March 31, 2022
~~July~~January 1, ~~2021~~2022 to ~~July~~January 31, ~~2021~~2022	—	$	—	—	$	—
~~August~~February 1, ~~2021~~2022 to ~~August 31, 2021~~February 28, 2022	—	$	—	—	$	—
~~September~~March 1, ~~2021~~2022 to ~~September 30, 2021~~March 31, 2022	—	$	—	—	$	—
For the Three Months Ended ~~September 30, 2021~~March 31, 2022	—	$	—	—	$	52,764

Stock Retained in Net Settlement2
~~July~~January 1, ~~2021~~2022 to ~~July~~January 31, ~~2021~~2022	~~12,729~~3,336
~~August~~February 1, ~~2021~~2022 to ~~August 31, 2021~~February 28, 2022	~~82,797~~1,870
~~September~~March 1, ~~2021~~2022 to ~~September 30, 2021~~March 31, 2022	~~29,081~~71,147
For the Three Months Ended ~~September 30, 2021~~March 31, 2022	~~124,607~~76,353

1 On March 17, 2016, the Board of Directors of the Company authorized a program to repurchase up to $100 million of common stock and extended the program by an additional $100 million on August 2, 2019. The share repurchase program will continue in effect until terminated by the Board of Directors of the Company. ~~Purchases were made in open-market transactions.~~

2 ~~In October 2021, the stockholders~~Consists of ~~the Company approved~~shares withheld from settlement of equity awards under the amended and restated 2014 Stock Incentive Plan ~~which among other changes permitted 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 at the vesting price of the~~obligations associated ~~restricted stock unit~~with settlement.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

~~None.~~Not applicable.

5257

Table of Contents

ITEM 5. OTHER INFORMATION

None.

ITEM 6.EXHIBITS


Exhibit Number	Description	Incorporated By Reference to

~~10.1~~4.1	~~Amendment to Offer Letter~~Indenture, dated as of February 24, 2022, between ~~Derrick K. Walsh and~~ Axos Financial, Inc. and U.S. Bank Trust Company, National Association, as trustee	~~Filed herewith.~~Exhibit 4.1 to the Current Report on Form 8-K filed on February 24, 2022

~~10.2~~4.2	~~Change~~ First Supplemental Indenture, dated as of ~~Control Severance Agreement~~February 24, 2022, between ~~Derrick K. Walsh and~~ Axos Financial, Inc. and ~~Axos~~U.S. Bank Trust Company, National Association, as trustee	~~Filed herewith.~~Exhibit 4.2 to the Current Report on Form 8-K filed on February 24, 2022

~~10.3~~4.3	~~Amended and Restated Employment Agreement between Andrew J. Micheletti and~~ Form of Global Note to represent the 4.00% Fixed-to-Floating Rate Subordinated Notes due 2032 of Axos ~~Bank~~Financial, Inc. (included in Exhibit 4.2 as Exhibit A)	~~Filed herewith.~~Exhibit 4.3 to the Current Report on Form 8-K filed on February 24, 2022

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

5358

Table of Contents

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~~April 28, ~~2021~~2022

By:

/s/ Gregory Garrabrants

Gregory Garrabrants
President and Chief Executive Officer
(Principal Executive Officer)

Dated:

~~October~~April 28, ~~2021~~2022

By:

/s/ Derrick K. Walsh

Derrick K. Walsh
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

5459


	As of September 30, 2020
(Dollars in thousands)	With Allowance		With No Allowance		Total
Single Family - Mortgage & Warehouse	$	76,032	$	56,894	$	132,926
Multifamily and Commercial Mortgage	31,001		1,847		32,848
Commercial Real Estate	—		—		—
Commercial & Industrial - Non-RE	5,580		—		5,580
Auto & Consumer	623		131		754
Other	—		—		—
Total nonaccrual loans	$	113,236	$	58,872	$	172,108
Nonaccrual loans to total loans					1.56		%