Axos Financial (AX) 8-K Results of Operations and Financial Condition

Exhibit 99.2

BofI HOLDING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share data)

(Unaudited)

	September 30, 2010			June 30, 2010
ASSETS
Cash and due from banks	$	4,364		$	5,834
Federal funds sold		9,935			12,371
Total cash and cash equivalents		14,299			18,205
Securities:
Trading		4,441			4,402
Available for sale		240,726			242,430
Held to maturity (fair value $303,774 in September 2010, $326,867 in June 2010)		304,969			320,807
Stock of the Federal Home Loan Bank, at cost		17,449			18,148
Loans held for sale, carried at fair value at September 30, 2010		17,648			5,511
Loans - net of allowance for loan losses of $6,426 in September 2010; $5,893 in June 2010		876,934			774,899
Accrued interest receivable		5,414			5,040
Furniture, equipment and software - net		983			621
Deferred income tax		8,765			6,153
Cash surrender value of life insurance		4,956			4,911
Other real estate owned and reposessed vehicles		3,660			2,701
Other assets		17,749			17,253
TOTAL	$	1,517,993		$	1,421,081
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	4,581		$	5,441
Interest bearing		987,143			962,739
Total deposits		991,724			968,180
Securities sold under agreements to repurchase		130,000			130,000
Advances from the Federal Home Loan Bank		250,000			182,999
Subordinated debentures		5,155			5,155
Accrued interest payable		1,941			1,979
Accounts payable and accrued liabilities		6,406			2,960
Total liabilities		1,385,226			1,291,273
STOCKHOLDERS’ EQUITY:
Preferred stock - 1,000,000 shares authorized;
Series A - $10,000 stated value; 515 (September 2010) and 515 (June 2010) shares issued and outstanding		5,063			5,063
Common stock - $0.01 par value; 25,000,000 shares authorized; 10,868,564 shares issued and 10,222,747 shares outstanding (September 2010); 10,827,673 shares issued and 10,184,975 shares outstanding (June 2010);		109			108
Additional paid-in capital		85,204			84,605
Accumulated other comprehensive income - net of tax		1,691			4,043
Retained earnings		44,637			39,882
Treasury stock		(3,937	)		(3,893	)
Total stockholders’ equity		132,767			129,808
TOTAL	$	1,517,993		$	1,421,081

BofI HOLDING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Dollars in thousands, except earnings per share)

(Unaudited)

	Three Months Ended September 30,
	2010			2009
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	12,849		$	10,350
Investments		8,240			11,427
Total interest and dividend income		21,089			21,777
INTEREST EXPENSE:
Deposits		5,227			5,431
Advances from the Federal Home Loan Bank		1,706			2,224
Other borrowings		1,484			1,557
Total interest expense		8,417			9,212
Net interest income		12,672			12,565
Provision for loan losses		1,600			2,000
Net interest income, after provision for loan losses		11,072			10,565
NON-INTEREST INCOME:
Other-than-temporary loss on securities:
Total impairment losses		(631	)		(1,390	)
Loss recognized in other comprehensive loss		201			21
Net impairment loss recognized in earnings		(430	)		(1,369	)
Fair value gain (loss) on trading securities		39			(142	)
Total unrealized loss on securities		(391	)		(1,511	)
Prepayment penalty fee income		1,000			47
Mortgage banking income		1,393			332
Banking service fees and other income		120			123
Total non-interest income (loss)		2,122			(1,009	)
NON-INTEREST EXPENSE:
Salaries, employee benefits and stock-based compensation		2,821			1,408
Professional services		434			284
Occupancy and equipment		165			104
Data processing and internet		230			200
Advertising and promotional		157			84
Depreciation and amortization		75			54
Real estate owned and repossessed vehicles		213			302
FDIC and OTS regulatory fees		438			395
Other general and administrative		666			446
Total non-interest expense		5,199			3,277
INCOME BEFORE INCOME TAXES		7,995			6,279
INCOME TAXES		3,163			2,571
NET INCOME	$	4,832		$	3,708
NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	4,755		$	3,535
COMPREHENSIVE INCOME	$	2,480		$	3,872
Basic earnings per share	$	0.45		$	0.43
Diluted earnings per share	$	0.45		$	0.41

BofI HOLDING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

(Dollars in thousands)

(Unaudited)

					Common Stock														Accumulated Other Comprehensive Income (Loss),
	Convertible Preferred Stock				Number of Shares									Additional					Net of Income			Treasury			Comprehensive
	Shares		Amount		Issued		Treasury			Outstanding		Amount		Paid-in Capital		Retained Earnings			Tax			Stock			Income			Total
BALANCE—July 1, 2010		515	$	5,063		10,827,673		(642,698	)		10,184,975	$	108	$	84,605	$	39,882		$	4,043		$	(3,893	)				$	129,808
Comprehensive income:
Net income		—		—		—		—			—		—		—		4,832			—			—		$	4,832			4,832
Net unrealized loss from investment securities—net of income tax expense		—		—		—		—			—		—		—		—			(2,352	)		—			(2,352	)		(2,352	)
Total comprehensive income																									$	2,480
Cash dividends on preferred stock		—		—		—		—			—		—		—		(77	)		—			—						(77	)
Stock-based compensation expense		—		—		—		—			—		—		380		—			—			—						380
Restricted stock grants		—		—		24,003		(3,119	)		20,884		1		49		—			—			(44	)					6
Stock option exercises and tax benefits of equity compensation		—		—		16,888		—			16,888		—		170		—			—			—						170
BALANCE—September 30, 2010		515	$	5,063		10,868,564		(645,817	)		10,222,747	$	109	$	85,204	$	44,637		$	1,691		$	(3,937	)				$	132,767

BofI HOLDING, INC. AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Three Months Ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	4,832		$	3,708
Adjustments to reconcile net income to net cash used in operating activities:
Accretion of discounts on securities		(4,379	)		(6,408	)
Amortization (accretion) of premiums (discounts) on loans		(826	)		(1,607	)
Amortization of borrowing costs		1			4
Stock-based compensation expense		380			132
Valuation of financial instruments carried at fair value		(39	)		142
Impairment charge on securities held to maturity		430			1,369
Provision for loan losses		1,600			2,000
Deferred income taxes		(976	)		(678	)
Origination of loans held for sale		(60,623	)		(25,006	)
Unrealized gain on loans held for sale		(380	)		—
Gain on sales of loans held for sale		(1,393	)		(332	)
Proceeds from sale of loans held for sale		50,259			25,163
Depreciation and amortization of furniture, equipment and software		75			54
Net changes in assets and liabilities which provide (use) cash:
Accrued interest receivable		(374	)		(231	)
Other assets		(144	)		1,182
Accrued interest payable		(38	)		(88	)
Accounts payable and accrued liabilities		3,328			(3,361	)
Net cash used in operating activities	$	(8,267	)	$	(3,957	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities		(42,291	)		(69,491	)
Proceeds from repayment of securities		59,868			33,312
Proceeds from redemption of stock of the Federal Home Loan Bank		699			—
Origination of loans, net		(67,020	)		(8,436	)
Proceeds from sales of repossessed assets		959			3,124
Purchases of loans, net of discounts and premiums		(80,669	)		(1,633	)
Principal repayments on loans		42,565			29,005
Purchases of furniture, equipment and software		(437	)		(112	)
Net cash used in investing activities	$	(86,326	)	$	(14,231	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits		23,544			114,989
Proceeds from the Federal Home Loan Bank advances		102,000			21,000
Repayment of the Federal Home Loan Bank advances		(35,000	)		(58,000	)
Proceeds from borrowing at the Fed Discount Window		—			100,000
Repayment of borrowing at the Fed Discount Window		—			(160,000	)
Proceeds from exercise of common stock options		124			152
Proceeds from issuance of common stock		1			—
Tax benefit from exercise of common stock options and vesting of restricted stock grants		95			114
Cash dividends on preferred stock		(77	)		(77	)
Net cash provided by financing activities		90,687			18,178
NET CHANGE IN CASH AND CASH EQUIVALENTS		(3,906	)		(10	)
CASH AND CASH EQUIVALENTS—Beginning of year		18,205			8,406
CASH AND CASH EQUIVALENTS—End of period	$	14,299		$	8,396
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on deposits and borrowed funds	$	8,455		$	9,296
Income taxes paid	$	1,012		$	2,200
Transfers to other real estate and repossessed vehicles	$	2,092		$	944
Preferred stock dividends declared but not paid	$	—		$	96

LOANS

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

UNAUDITED	September 30, 2010			June 30, 2010
	(Dollars in Thousands)
Mortgage loans on real estate:
Residential single family (one to four units)	$	309,679		$	259,790
Home equity		41,874			22,575
Residential multifamily (five units or more)		410,401			370,469
Commercial and land		37,781			33,553
Consumer - Recreational vehicle		37,284			39,842
Other		55,487			62,875
Total gross loans		892,506			789,104
Allowance for loan losses		(6,426	)		(5,893	)
Unaccreted discounts and loan fees		(9,146	)		(8,312	)
Net loans	$	876,934		$	774,899

Nonperforming loans and foreclosed assets or “nonperforming assets” consisted of the following as of the dates indicated:

UNAUDITED	September 30, 2010			June 30, 2010
	(Dollars in Thousands)
Nonperforming assets:
Non-accrual loans:
Loans secured by real estate:
Single family	$	6,025		$	5,841
Home equity loans		143			87
Multifamily		7,354			4,675
Commercial		—			—
Total nonaccrual loans secured by real estate		13,522			10,603
RV/Auto		936			1,084
Other		—			16
Total nonperforming loans		14,458			11,703
Foreclosed real estate		2,738			2,354
Repossessed-vehicles		922			347
Total nonperforming assets	$	18,118		$	14,404
Total nonperforming loans as a percentage of total loans		1.62	%		1.48	%
Total nonperforming assets as a percentage of total assets		1.19	%		1.01	%

INVESTMENT SECURITIES

The amortized costs, carrying amount and fair value for the major categories of investment securities trading, available for sale, and held to maturity were:

	Trading		Available for sale									Held to maturity
UNAUDITED	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		Carrying Amount		Unrecognized Gains		Unrecognized Losses			Fair Value
	(Dollars in Thousands)
	September 30, 2010
Mortgage-backed securities (RMBS):
U.S. agencies 1	$	—	$	71,634	$	983	$	(760	)	$	71,857	$	32,271	$	481	$	(1,050	)	$	31,702
Non-agency2		—		104,472		13,419		(6	)		117,885		272,698		12,787		(13,413	)		272,072
Total mortgage-backed securities		—		176,106		14,402		(766	)		189,742		304,969		13,268		(14,463	)		303,774
Other debt securities:
U.S. agencies 1		—		50,985		—		(1	)		50,984		—		—		—			—
Non-agency		4,441		—		—		—			—		—		—		—			—
Total other debt securities		4,441		50,985		—		(1	)		50,984		—		—		—			—
Total debt securities	$	4,441	$	227,091	$	14,402	$	(767	)	$	240,726	$	304,969	$	13,268	$	(14,463	)	$	303,774
	June 30, 2010
Mortgage-backed securities (RMBS):
U.S. agencies1	$	—	$	56,933	$	1,346	$	—		$	58,279	$	35,317	$	528	$	(229	)	$	35,616
Non-agency 2		—		109,659		13,527		—			123,186		285,490		16,222		(10,461	)		291,251
Total mortgage-backed securities		—		166,592		14,873		—			181,465		320,807		16,750		(10,690	)		326,867
Other debt securities:
U.S. agencies1		—		60,966		2		(3	)		60,965		—		—		—			—
Non-agency		4,402		—		—		—			—		—		—		—			—
Total other debt securities		4,402		60,966		2		(3	)		60,965		—		—		—			—
Total debt securities	$	4,402	$	227,558	$	14,875	$	(3	)	$	242,430	$	320,807	$	16,750	$	(10,690	)	$	326,867

¹ U.S. government-backed or government sponsored enterprises including Fannie Mae, Freddie Mac and Ginnie Mae.

² Private sponsors of securities collateralized primarily by pools of 1-4 family residential first mortgages . Primarily supersenior securities secured by prime, Alt-A or pay-option ARM mortgages.

DEPOSITS

Deposit accounts are summarized as follows:

	September 30, 2010					June 30, 2010
UNAUDITED	Amount		Rate1			Amount		Rate1
	(Dollars in thousands)
Non-interest bearing:	$	4,581		0.00	%	$	5,441		0.00	%
Interest bearing:
Demand		68,494		0.81	%		63,962		1.22	%
Savings		292,201		0.82	%		358,293		1.94	%
Time deposits:
Under $100,000		226,165		2.94	%		200,859		4.39	%
$100,000 or more		400,283		2.74	%		339,625		3.85	%
Total time deposits		626,448		2.81	%		540,484		4.11	%
Total interest bearing		987,143		2.08	%		962,739		3.20	%
Total deposits	$	991,724		2.07	%	$	968,180		3.18	%

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

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

UNAUDITED	September 30, 2010		June 30, 2010		September 30, 2009
Checking and savings accounts		16,034		17,192		16,429
Time deposits		11,576		10,554		9,544
Total number of deposits accounts		27,610		27,746		25,973

AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID

The following table presents information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin for the three months ended September 30, 2010 and 2009:

	For the Three Months Ended September 30,
UNAUDITED	2010							2009
	(Dollars in thousands)
Assets:	Average Balance2		Interest Income/Expense		Average Yields Earned/Rates Paid1			Average Balance2		Interest Income/Expense		Average Yields Earned/Rates Paid
Loans3, 4	$	828,259	$	12,849		6.21	%	$	612,955	$	10,350		6.75	%
Federal funds sold		10,188		4		0.16	%		38,993		16		0.16	%
Interest-earning deposits in other financial institutions		115		—		0.00	%		283		—		0.00	%
Mortgage-backed and other investment securities 5		569,960		8,216		5.77	%		623,225		11,372		7.30	%
Stock of the FHLB, at cost		17,806		20		0.45	%		18,848		39		0.83	%
Total interest-earning assets		1,426,328		21,089		5.91	%		1,294,304		21,777		6.73	%
Noninterest-earning assets		32,930							27,713
Total assets	$	1,459,258						$	1,322,017
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	387,161	$	836		0.86	%	$	360,850	$	1,552		1.72	%
Time deposits		585,034		4,391		3.00	%		378,099		3,879		4.10	%
Securities sold under agreements to repurchase		130,000		1,446		4.45	%		130,000		1,436		4.42	%
Advances from the FHLB		204,902		1,706		3.33	%		215,682		2,224		4.12	%
Other borrowings		5,155		38		2.95	%		133,198		121		0.36	%
Total interest-bearing liabilities		1,312,252		8,417		2.57	%		1,217,829		9,212		3.03	%
Noninterest-bearing demand deposits		7,065							4,560
Other noninterest-bearing liabilities		6,848							7,609
Stockholders’ equity		133,093							92,019
Total liabilities and stockholders’ equity	$	1,459,258						$	1,322,017
Net interest income			$	12,672						$	12,565
Interest rate spread6						3.34	%						3.70	%
Net interest margin7						3.55	%						3.88	%

¹ Annualized.

² Average balances are obtained from daily data.

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

⁴ Interest 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.

⁵ All investments are taxable.

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

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