Financial Data and Key Metrics Changes - The company reported net income of $80 million and earnings per share of $1.32 for Q3 2023, representing year-over-year growth of 29% and 28% respectively [8][11] - Book value per share increased to $31.07, up 17% from the previous year [8] - Net interest margin was 4.42%, down seven basis points from the previous quarter but up 40 basis points year-over-year [9][10] - Total deposits increased by approximately $1 billion linked quarter, reaching $16.7 billion, with a year-over-year growth of approximately 32% [7][12] Business Line Data and Key Metrics Changes - Ending net loans for investment balances were $15.8 billion, up 2% linked quarter and 9% annualized, with growth in single-family mortgage, multifamily, and C&I loans [9] - Loan originations for the quarter were $1.8 billion, down from $2.4 billion in the same quarter last year, with tightened pricing and underwriting guidelines in several categories [28] - Noninterest income for Q3 2023 was $32.2 million, an increase of 12% year-over-year, driven by a 40% increase in broker-dealer fees linked quarter [29] Market Data and Key Metrics Changes - Approximately 57% of loans were floating rate, with the average yield on held-for-investment loans at 7.07%, up 45 basis points from the prior quarter [16] - The company reported a strong capital position with a Tier 1 leverage ratio of 10.2% at the Bank, well above regulatory requirements [11] - The company maintained a diverse deposit base, with 43% demand deposits, 46% savings and money market, and 11% CDs [17] Company Strategy and Development Direction - The company aims to maintain investments in technology and personnel while capitalizing on market dislocations to grow its business [25] - There are plans to expand into new areas and acquire teams, with a focus on enhancing deposit and lending capabilities [38] - The company is strategically positioned to take advantage of reduced competition in the lending market, allowing for better pricing and terms [41] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's stability and strength amid recent banking industry turmoil, highlighting a robust liquidity position [12] - The outlook for loan growth is projected to be in the high single digits to low teens year-over-year, with net interest margin guidance of 4.25% to 4.35% for the next few quarters [31] - Management noted that maintaining excess liquidity is prudent given the uncertain economic environment [31] Other Important Information - The company repurchased approximately $32 million of common stock in Q3 2023, with an additional $100 million approved for share repurchases [11][30] - The company has a healthy pipeline of new advisory clients, signing 15 new deals with a combined assets under custody of $1 billion [18] Q&A Session Summary Question: How does the liquidity on the balance sheet affect NII? - Management indicated that the liquidity is fairly neutral as it is placed with the Fed, with a slight benefit expected [34] Question: Are there any concerns regarding substandard loans? - Management stated that there are no significant concerns and that the attachment points remain strong [36] Question: What expansion opportunities are being considered? - Management mentioned potential team acquisitions and bulk loan purchases, indicating a positive outlook on deposit growth [38] Question: What is the status of the security segment? - Management highlighted ongoing improvements and the development of a new core processing system to enhance competitiveness [50] Question: What is the onboarding timeline for new RIAs? - Management estimated a six-month timeframe for onboarding new RIAs after contracts are signed [54]

Loan Portfolio - Total loans reached $16020 million, an increase of $371 million from the previous quarter[2] - CRE Specialty loans have a weighted average LTV of 42%, with non-performing loans at $15 million[3] - Single Family Mortgage & Warehouse loans amounted to $3925 million[2] - Multifamily loans reached $2245 million[2] - Commercial & Industrial Non-RE loans increased by $207 million to $1598 million[2] Financial Performance - Net interest income was $198982 thousand for the quarter ended March 31, 2023[42] - Net income was $79850 thousand, with basic earnings per share at $133[42] - Total assets reached $19782481 thousand[39] - Total deposits amounted to $16738869 thousand[39] Capitalization - Equity to assets ratio was 932%[39] - Tier 1 leverage ratio for Axos Financial, Inc was 929%[39]

PART I – FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Presents the unaudited condensed consolidated financial statements and accompanying notes for the period [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)%20as%20of%20March%2031%2C%202023%20and%20June%2030%2C%202022) Condensed Consolidated Balance Sheets (March 31, 2023 vs. June 30, 2022) | Metric (in thousands) | March 31, 2023 | June 30, 2022 | Change (Absolute) | Change (%) | | :-------------------- | :------------- | :------------ | :---------------- | :--------- | | **ASSETS** | | | | | | Total cash, cash equivalents, and cash segregated | $2,504,224 | $1,574,699 | $929,525 | 59.03% | | Loans—net | $15,836,255 | $14,091,061 | $1,745,194 | 12.38% | | Total Assets | $19,782,481 | $17,401,165 | $2,381,316 | 13.68% | | **LIABILITIES** | | | | | | Non-interest bearing deposits | $3,172,791 | $5,033,970 | $(1,861,179) | -36.97% | | Interest bearing deposits | $13,566,078 | $8,912,452 | $4,653,626 | 52.21% | | Total deposits | $16,738,869 | $13,946,422 | $2,792,447 | 20.02% | | Total Liabilities | $17,938,377 | $15,758,192 | $2,180,185 | 13.83% | | **STOCKHOLDERS' EQUITY** | | | | | | Total Stockholders' Equity | $1,844,104 | $1,642,973 | $201,131 | 12.24% | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income%20(unaudited)%20for%20the%20three%20and%20nine%20months%20ended%20March%2031%2C%202023%20and%202022) Condensed Consolidated Statements of Income (March 31, 2023 vs. 2022) | Metric (in thousands) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Total interest and dividend income | $307,334 | $160,181 | 91.88% | $810,708 | $475,567 | 70.48% | | Total interest expense | $108,352 | $10,643 | 918.10% | $231,341 | $33,819 | 584.09% | | Net interest income | $198,982 | $149,538 | 33.08% | $579,367 | $441,748 | 31.15% | | Provision for credit losses | $5,500 | $4,500 | 22.22% | $17,750 | $12,500 | 42.00% | | Non-interest income | $32,246 | $28,774 | 12.00% | $87,783 | $86,263 | 1.76% | | Total non-interest expense | $111,044 | $86,819 | 27.90% | $334,659 | $257,269 | 30.08% | | Income before income taxes | $114,684 | $86,993 | 31.83% | $314,741 | $258,242 | 21.80% | | Income taxes | $34,834 | $25,170 | 38.32% | $94,932 | $75,422 | 25.87% | | Net Income | $79,850 | $61,823 | 29.16% | $219,809 | $182,820 | 20.23% | | Basic EPS | $1.33 | $1.04 | 27.88% | $3.67 | $3.07 | 19.54% | | Diluted EPS | $1.32 | $1.02 | 29.41% | $3.63 | $3.02 | 20.20% | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(unaudited)%20for%20the%20three%20and%20nine%20months%20ended%20March%2031%2C%202023%20and%202022) Condensed Consolidated Statements of Comprehensive Income (March 31, 2023 vs. 2022) | Metric (in thousands) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Net Income | $79,850 | $61,823 | 29.16% | $219,809 | $182,820 | 20.23% | | Net unrealized gain (loss) from available-for-sale securities, net of income tax | $1,372 | $(2,970) | -146.19% | $(2,640) | $(4,133) | -36.14% | | Other comprehensive income (loss) | $1,372 | $(2,970) | -146.19% | $(2,640) | $(4,133) | -36.14% | | Comprehensive income | $81,222 | $58,853 | 37.99% | $217,169 | $178,687 | 21.54% | [Condensed Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(unaudited)%20for%20the%20three%20and%20nine%20months%20ended%20March%2031%2C%202023%20and%202022) Condensed Consolidated Statements of Stockholders' Equity (March 31, 2023 vs. June 30, 2022) | Metric (in thousands) | March 31, 2023 | June 30, 2022 | Change (Absolute) | Change (%) | | :-------------------- | :------------- | :------------ | :---------------- | :--------- | | Common stock | $694 | $689 | $5 | 0.73% | | Additional paid-in capital | $472,933 | $453,784 | $19,149 | 4.22% | | Accumulated other comprehensive income (loss)—net of tax | $(5,573) | $(2,933) | $(2,640) | 89.99% | | Retained earnings | $1,648,253 | $1,428,444 | $219,809 | 15.39% | | Treasury stock, at cost | $(272,203) | $(237,011) | $(35,192) | 14.85% | | Total stockholders' equity | $1,844,104 | $1,642,973 | $201,131 | 12.24% | - The Company repurchased **$31.6 million** of common stock at an average price of **$37.22 per share** during the three and nine months ended March 31, 2023[101](index=101&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)%20for%20the%20nine%20months%20ended%20March%2031%2C%202023%20and%202022) Condensed Consolidated Statements of Cash Flows (9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | | Net cash provided by operating activities | $119,247 | $69,482 | 71.63% | | Net cash used in investing activities | $(1,807,976) | $(1,724,106) | 4.86% | | Net cash provided by financing activities | $2,618,254 | $1,866,161 | 40.30% | | Net change in cash and cash equivalents | $929,525 | $211,537 | 339.04% | | Cash and cash equivalents—End of period | $2,504,224 | $1,249,314 | 100.45% | - Net increase in deposits was a primary driver for the increase in net cash provided by financing activities, increasing by **$2.79 billion (YoY)**[20](index=20&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Summary of Significant Accounting Policies](index=10&type=section&id=1.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - The Company operates through two segments: **Banking Business** (Axos Bank) and **Securities Business** (Axos Nevada Holding, LLC)[26](index=26&type=chunk) - Reclassifications of certain non-interest income components and cash flow amounts for prior periods were made to conform to current presentation, with **no effect on total non-interest income, net income, financial position, or cash flows**[27](index=27&type=chunk) - The Company plans to adopt ASUs (2020-04, 2021-04, 2022-06) related to reference rate reform in fiscal year 2024, **not expecting a material impact** on its Consolidated Financial Statements[29](index=29&type=chunk) [2. Acquisitions](index=11&type=section&id=2.%20ACQUISITIONS) - On August 2, 2021, Axos Clearing LLC acquired E*TRADE Advisor Services (rebranded as Axos Advisor Services, AAS) for **$54.8 million in cash**[31](index=31&type=chunk) - The acquisition resulted in **$27.1 million** of identifiable intangible assets and **$24.4 million** of goodwill, expected to be tax deductible[33](index=33&type=chunk) Intangible Assets Acquired (as of acquisition date) | Intangible Asset | Fair Value (in thousands) | Useful Lives (Years) | | :--------------- | :------------------------ | :------------------- | | Trade Name | $290 | 0.16 | | Proprietary Technology | $10,990 | 7 | | Customer Relationships | $15,650 | 14 | | Non-Compete Agreements | $130 | 1 | | Total | $27,060 | | [3. Fair Value](index=12&type=section&id=3.%20FAIR%20VALUE) - Non-recurring fair value measurements for other real estate owned and repossessed vehicles resulted in charge-offs of **$535 thousand** for the three months ended March 31, 2023, and **$1,499 thousand** for the nine months ended March 31, 2023[50](index=50&type=chunk) Assets Measured at Fair Value on a Recurring Basis (March 31, 2023) | Asset (in thousands) | Level 2 (Observable Inputs) | Level 3 (Unobservable Inputs) | Total | | :------------------- | :-------------------------- | :---------------------------- | :---- | | Securities—Trading: Municipal | $400 | — | $400 | | Securities—Available-for-sale: Agency MBS | $22,782 | — | $22,782 | | Securities—Available-for-sale: Non-Agency MBS | — | $206,300 | $206,300 | | Securities—Available-for-sale: Municipal | $3,384 | — | $3,384 | | Securities—Available-for-sale: Asset-backed securities and structured notes | $47,146 | — | $47,146 | | Loans held for sale | $7,920 | — | $7,920 | | Mortgage servicing rights | — | $25,396 | $25,396 | | Other assets—Derivative instruments | — | $381 | $381 | Loans Held for Sale at Fair Value (March 31, 2023 vs. June 30, 2022) | Metric (in thousands) | March 31, 2023 | June 30, 2022 | | :-------------------- | :------------- | :------------ | | Aggregate fair value | $7,920 | $4,973 | | Contractual balance | $7,663 | $4,881 | | Unrealized gain | $257 | $92 | [4. Securities](index=18&type=section&id=4.%20SECURITIES) - Unrealized losses on available-for-sale securities are primarily driven by the **increase in interest rates** since the securities were purchased[64](index=64&type=chunk) - As of March 31, 2023, the Company had **twenty-nine securities** in a continuous loss position for more than 12 months and **twenty-five** for less than 12 months[67](index=67&type=chunk) Total Debt Securities (March 31, 2023 vs. June 30, 2022) | Metric (in thousands) | March 31, 2023 | June 30, 2022 | Change (Absolute) | Change (%) | | :-------------------- | :------------- | :------------ | :---------------- | :--------- | | Trading Securities (Fair Value) | $400 | $1,758 | $(1,358) | -77.25% | | Available-for-sale Securities (Fair Value) | $279,612 | $262,518 | $17,094 | 6.51% | | Total Debt Securities (Fair Value) | $279,612 | $262,518 | $17,094 | 6.51% | | Total Amortized Cost (Available-for-sale) | $286,731 | $265,867 | $20,864 | 7.85% | | Total Unrealized Gains (Available-for-sale) | $1,654 | $1,972 | $(318) | -16.13% | | Total Unrealized Losses (Available-for-sale) | $(8,773) | $(5,321) | $(3,452) | 64.87% | [5. Loans & Allowance for Credit Losses](index=21&type=section&id=5.%20LOANS%20&%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) - The provision for credit losses for the three and nine months ended March 31, 2023, was primarily driven by **loan growth, changes in the macroeconomic environment, and changes in loan product mix**[74](index=74&type=chunk) Loan Portfolio Composition (March 31, 2023 vs. June 30, 2022) | Loan Portfolio (in thousands) | March 31, 2023 | June 30, 2022 | Change (Absolute) | Change (%) | | :---------------------------- | :------------- | :------------ | :---------------- | :--------- | | Single Family - Mortgage & Warehouse | $4,087,525 | $3,988,462 | $99,063 | 2.48% | | Multifamily and Commercial Mortgage | $3,082,801 | $2,877,680 | $205,121 | 7.13% | | Commercial Real Estate | $5,794,304 | $4,781,044 | $1,013,260 | 21.19% | | Commercial & Industrial - Non-RE | $2,454,839 | $2,028,128 | $426,711 | 21.04% | | Auto & Consumer | $594,596 | $567,228 | $27,368 | 4.82% | | Other | $6,240 | $11,134 | $(4,894) | -43.96% | | Total gross loans and leases | $16,020,305 | $14,253,676 | $1,766,629 | 12.39% | | Allowance for credit losses - loans | $(161,293) | $(148,617) | $(12,676) | 8.53% | Nonaccrual Loans (March 31, 2023 vs. June 30, 2022) | Metric (in thousands) | March 31, 2023 | June 30, 2022 | Change (Absolute) | Change (%) | | :-------------------- | :------------- | :------------ | :---------------- | :--------- | | Total nonaccrual loans | $95,941 | $118,194 | $(22,253) | -18.83% | | Nonaccrual loans to total loans | 0.60% | 0.83% | -0.23% | -27.71% | [6. Stockholders' Equity and Stock-Based Compensation](index=27&type=section&id=6.%20STOCKHOLDERS'%20EQUITY%20AND%20STOCK-BASED%20COMPENSATION) - The Company repurchased **$31.6 million** of common stock at an average price of **$37.22 per share** during the three and nine months ended March 31, 2023[101](index=101&type=chunk) - On April 26, 2023, the Board of Directors authorized a new program to repurchase up to **$100 million** of common stock, in addition to the existing **$21 million** remaining authorization[101](index=101&type=chunk)[254](index=254&type=chunk) Unrecognized Stock Award Compensation Expense (in thousands) | Fiscal Year | Amount | | :---------- | :----- | | Remainder of fiscal year 2023 | $7,113 | | 2024 | $22,261 | | 2025 | $14,418 | | 2026 | $5,561 | | 2027 | $832 | | Thereafter | $194 | | Total | $50,379 | [7. Earnings Per Common Share](index=28&type=section&id=7.%20EARNINGS%20PER%20COMMON%20SHARE) Earnings Per Common Share (March 31, 2023 vs. 2022) | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :----- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Basic EPS | $1.33 | $1.04 | 27.88% | $3.67 | $3.07 | 19.54% | | Diluted EPS | $1.32 | $1.02 | 29.41% | $3.63 | $3.02 | 20.20% | | Average common shares issued and outstanding (Basic) | 59,930,634 | 59,542,128 | 0.65% | 59,928,263 | 59,476,488 | 0.76% | | Total dilutive common shares outstanding (Diluted) | 60,627,400 | 60,611,959 | 0.02% | 60,595,414 | 60,605,486 | -0.02% | [8. Commitments and Contingencies](index=28&type=section&id=8.%20COMMITMENTS%20AND%20CONTINGENCIES) - As of March 31, 2023, the Company had unfunded commitments of **$57.5 million** in fixed rate loans and **$2,816.0 million** in variable rate loans, totaling **$2,873.5 million**[105](index=105&type=chunk) - A jury verdict in the MUFG Union Bank, N.A. v. Axos Bank, et al case awarded damages to Union Bank, which was reduced to **$7.8 million** for tortious interference after a settlement application. The Company recorded a **$16 million** accrued expense related to this litigation[110](index=110&type=chunk) - Axos Clearing's customer activities involve **off-balance-sheet risk** from securities transactions, with clearing agreements requiring broker-dealers to indemnify Axos Clearing for customer failures[106](index=106&type=chunk)[107](index=107&type=chunk) [9. Segment Reporting and Revenue Information](index=30&type=section&id=9.%20SEGMENT%20REPORTING%20AND%20REVENUE%20INFORMATION) - The Company operates through two operating segments: **Banking Business** and **Securities Business**, with performance evaluated based on pre-tax profit or loss[112](index=112&type=chunk)[113](index=113&type=chunk) Segment Income Before Taxes (3 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | Banking Business 2023 | Securities Business 2023 | Corporate/Eliminations 2023 | Consolidated 2023 | Banking Business 2022 | Securities Business 2022 | Corporate/Eliminations 2022 | Consolidated 2022 | | :-------------------- | :-------------------- | :----------------------- | :-------------------------- | :---------------- | :-------------------- | :----------------------- | :-------------------------- | :---------------- | | Net interest income | $196,249 | $6,335 | $(3,602) | $198,982 | $147,828 | $3,377 | $(1,667) | $149,538 | | Provision for credit losses | $5,500 | — | — | $5,500 | $4,500 | — | — | $4,500 | | Non-interest income | $10,685 | $38,298 | $(16,737) | $32,246 | $15,741 | $15,609 | $(2,576) | $28,774 | | Non-interest expense | $98,252 | $25,138 | $(12,346) | $111,044 | $65,076 | $20,242 | $1,501 | $86,819 | | Income before taxes | $103,182 | $19,495 | $(7,993) | $114,684 | $93,993 | $(1,256) | $(5,744) | $86,993 | Segment Income Before Taxes (9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | Banking Business 2023 | Securities Business 2023 | Corporate/Eliminations 2023 | Consolidated 2023 | Banking Business 2022 | Securities Business 2022 | Corporate/Eliminations 2022 | Consolidated 2022 | | :-------------------- | :-------------------- | :----------------------- | :-------------------------- | :---------------- | :-------------------- | :----------------------- | :-------------------------- | :---------------- | | Net interest income | $574,524 | $15,486 | $(10,643) | $579,367 | $432,328 | $14,059 | $(4,639) | $441,748 | | Provision for credit losses | $17,750 | — | — | $17,750 | $12,500 | — | — | $12,500 | | Non-interest income | $31,954 | $103,467 | $(47,638) | $87,783 | $46,864 | $45,169 | $(5,770) | $86,263 | | Non-interest expense | $295,332 | $74,924 | $(35,597) | $334,659 | $190,250 | $61,169 | $5,850 | $257,269 | | Income before taxes | $293,396 | $44,029 | $(22,684) | $314,741 | $276,442 | $(1,941) | $(16,259) | $258,242 | [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Analyzes operational performance, financial condition, liquidity, and capital resources for the reporting period [General Overview](index=32&type=section&id=General%20Overview) - Axos Financial, Inc. is a diversified financial services company with approximately **$19.8 billion in assets**[125](index=125&type=chunk) - Axos Bank provides consumer and business banking products, while Axos Clearing LLC, Axos Advisor Services, and Axos Invest, Inc. offer securities products and services[125](index=125&type=chunk) - The Company is supervised by the **Federal Reserve**, and Axos Bank is regulated by the **OCC** and **FDIC**. Securities entities are registered with the **SEC** and **FINRA**[126](index=126&type=chunk)[128](index=128&type=chunk) [Segment Information](index=33&type=section&id=Segment%20Information) - The **Banking Business** segment provides online banking, concierge banking, and mortgage, vehicle, and unsecured lending, along with deposit products and cash management services[130](index=130&type=chunk) - The **Securities Business** segment offers comprehensive securities clearing and custody services to introducing broker-dealers and registered investment advisor correspondents, and digital investment advisory services to retail investors[131](index=131&type=chunk) [Critical Accounting Estimates](index=33&type=section&id=Critical%20Accounting%20Estimates) - The preparation of condensed consolidated financial statements requires management to make **estimates and assumptions** that affect reported amounts and disclosures[132](index=132&type=chunk) - Critical accounting estimates are those considered most important due to **difficult judgments and inherent uncertainty**, detailed in Note 1 of the 2022 Form 10-K[133](index=133&type=chunk) [Use of Non-GAAP Financial Measures](index=34&type=section&id=USE%20OF%20NON-GAAP%20FINANCIAL%20MEASURES) - Non-GAAP financial measures include **adjusted earnings**, **adjusted earnings per common share**, and **tangible book value per common share**[135](index=135&type=chunk) - Adjusted earnings exclude the after-tax impact of non-recurring acquisition-related costs and other unusual charges to provide an understanding of **core business**[136](index=136&type=chunk) Adjusted Earnings and EPS (Non-GAAP) | Metric (in thousands, except per share) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income (GAAP) | $79,850 | $61,823 | $219,809 | $182,820 | | Acquisition-related costs | $2,846 | $2,803 | $8,169 | $8,676 | | Other costs | — | — | $16,000 | — | | Tax effects of adjustments | $(864) | $(811) | $(7,290) | $(2,534) | | Adjusted earnings (Non-GAAP) | $81,832 | $63,815 | $236,688 | $188,962 | | Adjusted EPS (Non-GAAP) | $1.35 | $1.05 | $3.91 | $3.12 | [Selected Financial Information](index=35&type=section&id=SELECTED%20FINANCIAL%20INFORMATION) Selected Balance Sheet Data (March 31, 2023 vs. June 30, 2022 vs. March 31, 2022) | Metric (in thousands) | Mar 31, 2023 | Jun 30, 2022 | Mar 31, 2022 | | :-------------------- | :----------- | :----------- | :----------- | | Total assets | $19,782,481 | $17,401,165 | $16,080,950 | | Loans—net of allowance for credit losses | $15,836,255 | $14,091,061 | $13,093,603 | | Total deposits | $16,738,869 | $13,946,422 | $12,733,002 | | Total stockholders' equity | $1,844,104 | $1,642,973 | $1,585,585 | Capital Ratios (March 31, 2023 vs. June 30, 2022 vs. March 31, 2022) | Metric | Mar 31, 2023 | Jun 30, 2022 | Mar 31, 2022 | | :----- | :----------- | :----------- | :----------- | | Axos Financial, Inc.: Tier 1 leverage | 9.29% | 9.25% | 9.43% | | Axos Financial, Inc.: Total capital | 13.63% | 12.73% | 13.30% | | Axos Bank: Tier 1 leverage | 10.17% | 10.65% | 10.51% | | Axos Bank: Total capital | 12.40% | 12.01% | 12.24% | | Axos Clearing LLC: Net capital | $79,459 | $38,915 | $39,109 | Selected Income Statement Data (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net interest income | $198,982 | $149,538 | $579,367 | $441,748 | | Net income | $79,850 | $61,823 | $219,809 | $182,820 | | Diluted EPS | $1.32 | $1.02 | $3.63 | $3.02 | [Results of Operations](index=37&type=section&id=RESULTS%20OF%20OPERATIONS) Net Income and EPS (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :----- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Net income | $79.9 million | $61.8 million | 29.16% | $219.8 million | $182.8 million | 20.23% | | Diluted EPS | $1.32 | $1.02 | 29.41% | $3.63 | $3.02 | 20.20% | [Net Interest Income](index=37&type=section&id=Net%20Interest%20Income) - Total interest and dividend income increased by **91.9%** for the three months and **70.5%** for the nine months, driven by higher rates and average loan balances[148](index=148&type=chunk) - Total interest expense surged by **918.1%** for the three months and **584.1%** for the nine months, mainly due to higher rates paid on deposits and increased deposit balances[149](index=149&type=chunk) Net Interest Income and Margin (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :----- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Net interest income | $199.0 million | $149.5 million | 33.1% | $579.4 million | $441.7 million | 31.2% | | Net interest margin | 4.42% | 4.02% | 0.40% pts | 4.41% | 4.11% | 0.30% pts | [Provision for Credit Losses](index=40&type=section&id=Provision%20for%20Credit%20Losses) - The increase in provision for credit losses was primarily driven by **loan growth, changes in the macroeconomic environment, and changes in loan product mix**[157](index=157&type=chunk) Provision for Credit Losses (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Provision for credit losses | $5,500 | $4,500 | 22.22% | $17,750 | $12,500 | 42.00% | [Non-Interest Income](index=41&type=section&id=Non-Interest%20Income) - Higher broker-dealer fee income was driven by **higher rates earned on cash sorting balances** at non-affiliated banks, partially offset by lower average cash sorting balances[160](index=160&type=chunk) - Lower mortgage banking income and prepayment penalty fee income were due to **higher mortgage rates, lower originations, and changes in MSR fair value**[160](index=160&type=chunk) Non-Interest Income (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Broker-dealer fee income | $13,745 | $5,174 | 165.65% | $32,735 | $17,968 | 82.19% | | Advisory fee income | $6,879 | $7,739 | -11.11% | $20,821 | $21,078 | -1.22% | | Banking and service fees | $8,443 | $7,278 | 15.90% | $25,100 | $22,444 | 11.84% | | Mortgage banking income | $1,107 | $5,790 | -80.88% | $5,113 | $15,700 | -67.40% | | Prepayment penalty fee income | $2,072 | $2,793 | -25.88% | $4,014 | $9,073 | -55.76% | | Total non-interest income | $32,246 | $28,774 | 12.00% | $87,783 | $86,263 | 1.76% | [Non-Interest Expense](index=41&type=section&id=Non-Interest%20Expense) - Headcount increased by **13% to 1,466** at March 31, 2023, from 1,294 at March 31, 2022, contributing to higher salaries and related costs[163](index=163&type=chunk) - The nine-month increase in general and administrative expenses was primarily due to a **$16.0 million accrual** in Q1 2023 for an adverse legal judgment[169](index=169&type=chunk) Non-Interest Expense (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Salaries and related costs | $53,046 | $43,133 | 23.00% | $149,762 | $123,849 | 20.92% | | Data processing | $15,808 | $12,274 | 28.80% | $44,462 | $36,565 | 21.59% | | Advertising and promotional | $11,786 | $3,357 | 251.10% | $29,055 | $10,131 | 186.79% | | Professional services | $6,747 | $4,346 | 55.29% | $23,289 | $14,834 | 57.00% | | General and administrative expense | $6,898 | $7,230 | -4.59% | $37,672 | $23,951 | 57.29% | | Total non-interest expenses | $111,044 | $86,819 | 27.90% | $334,659 | $257,269 | 30.08% | [Provision for Income Taxes](index=42&type=section&id=Provision%20for%20Income%20Taxes) Income Tax Expense and Effective Tax Rate (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Income tax expense | $34,834 | $25,170 | 38.32% | $94,932 | $75,422 | 25.87% | | Effective income tax rate | 30.37% | 28.93% | 1.44% pts | 30.16% | 29.21% | 0.95% pts | [Segment Results](index=42&type=section&id=SEGMENT%20RESULTS) [Banking Business](index=43&type=section&id=Banking%20Business) - The Banking Business segment's non-interest income decreased due to **lower mortgage banking income** (higher mortgage rates, lower originations, MSR fair value changes) and **lower prepayment penalty income**[188](index=188&type=chunk) Banking Business Segment Performance (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Net interest income | $196,249 | $147,828 | 32.75% | $574,524 | $432,328 | 32.89% | | Non-interest income | $10,685 | $15,741 | -32.12% | $31,954 | $46,864 | -31.81% | | Non-interest expense | $98,252 | $65,076 | 50.98% | $295,332 | $190,250 | 55.23% | | Income before taxes | $103,182 | $93,993 | 9.78% | $293,396 | $276,442 | 6.13% | Banking Business Segment Ratios (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Efficiency ratio | 47.48% | 39.79% | 48.70% | 39.70% | | Return on average assets | 1.61% | 1.84% | 1.59% | 1.89% | | Interest rate spread | 3.55% | 4.06% | 3.71% | 4.17% | | Net interest margin | 4.50% | 4.21% | 4.56% | 4.33% | [Securities Business](index=48&type=section&id=Securities%20Business) - Non-interest income increased significantly due to **higher fees earned on FDIC-insured bank deposits**, including amounts from the Banking Business segment[193](index=193&type=chunk) - Non-interest expense increased due to **higher salaries and related costs** from increased headcount and salaries, and higher professional services expense for the nine-month period[194](index=194&type=chunk) Securities Business Segment Performance (3 & 9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 3 Months Ended Mar 31, 2023 | 3 Months Ended Mar 31, 2022 | YoY Change (%) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | :-------------------------- | :-------------------------- | :------------- | | Net interest income | $6,335 | $3,377 | 87.60% | $15,486 | $14,059 | 10.15% | | Non-interest income | $38,298 | $15,609 | 145.36% | $103,467 | $45,169 | 129.08% | | Non-interest expense | $25,138 | $20,242 | 24.19% | $74,924 | $61,169 | 22.49% | | Income before taxes | $19,495 | $(1,256) | -1652.07% | $44,029 | $(1,941) | -2378.57% | [Financial Condition](index=48&type=section&id=FINANCIAL%20CONDITION) [Balance Sheet Analysis](index=48&type=section&id=Balance%20Sheet%20Analysis) - Total assets increased by **$2.4 billion**, or **13.7%**, to **$19.8 billion** as of March 31, 2023, from $17.4 billion at June 30, 2022[196](index=196&type=chunk) - The increase in total assets was primarily due to a **$1.7 billion increase in loans** and a **$0.9 billion increase in cash**, cash equivalents and cash segregated[196](index=196&type=chunk) - Total liabilities increased **$2.2 billion**, primarily due to a **$2.8 billion increase in deposits**, partially offset by a $0.4 billion decrease in securities loaned[196](index=196&type=chunk) [Loans](index=49&type=section&id=Loans) - Net loans held for investment increased **12.4% to $15.8 billion** at March 31, 2023, from $14.1 billion at June 30, 2022[198](index=198&type=chunk) - Loan originations totaled **$6.2 billion**, partially offset by repayments of **$4.3 billion**[198](index=198&type=chunk) Loan Portfolio Composition (March 31, 2023 vs. June 30, 2022) | Loan Portfolio | March 31, 2023 (Amount) | March 31, 2023 (Percent) | June 30, 2022 (Amount) | June 30, 2022 (Percent) | | :------------- | :---------------------- | :----------------------- | :--------------------- | :---------------------- | | Commercial Real Estate | $5,794,304 | 36.3% | $4,781,044 | 33.5% | | Single Family - Mortgage & Warehouse | $4,087,525 | 25.5% | $3,988,462 | 28.0% | | Multifamily and Commercial Mortgage | $3,082,801 | 19.2% | $2,877,680 | 20.2% | | Commercial & Industrial - Non-RE | $2,454,839 | 15.3% | $2,028,128 | 14.2% | | Auto & Consumer | $594,596 | 3.7% | $567,228 | 4.0% | | Other | $6,240 | 0.0% | $11,134 | 0.1% | | Total gross loans | $16,020,305 | 100.0% | $14,253,676 | 100.0% | [Asset Quality and Allowance for Credit Losses - Loans](index=49&type=section&id=Asset%20Quality%20and%20Allowance%20for%20Credit%20Losses%20-%20Loans) - The decrease in non-performing assets was primarily attributable to a **decrease in non-accrual single family mortgage loans**[203](index=203&type=chunk) - The Bank had **no performing troubled debt restructurings** as of March 31, 2023 and June 30, 2022[204](index=204&type=chunk) Non-performing Assets (March 31, 2023 vs. June 30, 2022) | Metric (in thousands) | March 31, 2023 | June 30, 2022 | Change (Absolute) | Change (%) | | :-------------------- | :------------- | :------------ | :---------------- | :--------- | | Total non-performing loans | $95,941 | $118,194 | $(22,253) | -18.83% | | Foreclosed real estate | $4,344 | — | $4,344 | N/A | | Repossessed—Autos | $958 | $798 | $160 | 20.05% | | Total non-performing assets | $101,243 | $118,992 | $(17,749) | -14.92% | | Total non-performing loans as a percentage of total loans | 0.60% | 0.83% | -0.23% pts | -27.71% | | Total non-performing assets as a percentage of total assets | 0.51% | 0.68% | -0.17% pts | -25.00% | [Investment Securities](index=50&type=section&id=Investment%20Securities) - Total investment securities were **$280.0 million** as of March 31, 2023, compared with $264.3 million at June 30, 2022[206](index=206&type=chunk) - During the nine months ended March 31, 2023, the Company purchased a **$30.0 million MBS security** and received principal repayments of approximately **$9.7 million** in its available-for-sale portfolio[206](index=206&type=chunk) [Deposits](index=50&type=section&id=Deposits) - Deposits increased by **$2.8 billion**, or **20.0%**, to **$16.7 billion** at March 31, 2023, from $13.9 billion at June 30, 2022[207](index=207&type=chunk) - Interest-bearing demand and savings increased **$3.9 billion** and time deposits increased **$743.2 million**[207](index=207&type=chunk) - Non-interest bearing deposits decreased **$1.9 billion**, or **37.0%**, to **$3.2 billion** at March 31, 2023, from $5.0 billion at June 30, 2022[207](index=207&type=chunk) Deposit Portfolio Composition (March 31, 2023 vs. June 30, 2022) | Deposit Type (in thousands) | March 31, 2023 (Amount) | March 31, 2023 (Rate) | June 30, 2022 (Amount) | June 30, 2022 (Rate) | | :-------------------------- | :---------------------- | :-------------------- | :--------------------- | :------------------- | | Non-interest bearing | $3,172,791 | —% | $5,033,970 | —% | | Interest bearing: Demand | $4,133,014 | 2.62% | $3,611,889 | 0.61% | | Interest bearing: Savings | $7,634,813 | 3.78% | $4,245,555 | 0.95% | | Total interest-bearing demand and savings | $11,767,827 | 3.37% | $7,857,444 | 0.79% | | Total time deposits | $1,798,251 | 3.95% | $1,055,008 | 1.25% | | Total deposits | $16,738,869 | 2.79% | $13,946,422 | 0.54% | [Borrowings](index=51&type=section&id=Borrowings) - Total borrowings were **$424.3 million** at March 31, 2023, down **$138.4 million**, or **24.6%**, from June 30, 2022[214](index=214&type=chunk) - Weighted average cost of borrowings during the quarter increased to **4.48%** for the quarter ended March 31, 2023, from 2.85% for the quarter ended June 30, 2022[214](index=214&type=chunk) - As of March 31, 2023, FHLB advances consisted of **$90 million** in term loans with a remaining weighted average life of 4.8 years, and the Company had an additional **$2.5 billion** of immediately available, undrawn capacity[215](index=215&type=chunk) [Stockholders' Equity](index=51&type=section&id=Stockholders'%20Equity) - Stockholders' equity increased **$201.1 million to $1,844.1 million** at March 31, 2023, compared to $1,643.0 million at June 30, 2022[216](index=216&type=chunk) - The increase was primarily due to **net income of $219.8 million** and net stock-based compensation activity of $15.6 million, partially offset by purchases of treasury stock[216](index=216&type=chunk) - The Company repurchased **$31.6 million** of common stock at an average price of **$37.22 per share** during the three and nine months ended March 31, 2023[217](index=217&type=chunk) [Liquidity](index=52&type=section&id=LIQUIDITY) - The primary driver behind the increase in net cash inflows from financing activities was a **larger net increase in deposits**[220](index=220&type=chunk) - As of March 31, 2023, the Bank had **$2.45 billion** immediately available and **$4.71 billion** available with additional collateral from the FHLB, and **$3.13 billion** available from the Federal Reserve Bank of San Francisco Discount Window[220](index=220&type=chunk)[221](index=221&type=chunk) Cash Flow Information (9 Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 9 Months Ended Mar 31, 2023 | 9 Months Ended Mar 31, 2022 | YoY Change (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------- | | Operating Activities | $119,247 | $69,482 | 71.63% | | Investing Activities | $(1,807,976) | $(1,724,106) | 4.86% | | Financing Activities | $2,618,254 | $1,866,161 | 40.30% | [Off-Balance Sheet Commitments](index=52&type=section&id=OFF-BALANCE%20SHEET%20COMMITMENTS) - As of March 31, 2023, the Company had unfunded commitments to originate loans with an aggregate outstanding principal balance of **$2,873.5 million**[223](index=223&type=chunk) - The Company also had commitments to sell loans with an aggregate outstanding principal balance of **$8.5 million**[223](index=223&type=chunk) - Axos Clearing's customer activities involve **off-balance-sheet risk** from potential non-performance by customers or other brokers, with clearing agreements requiring indemnification[224](index=224&type=chunk) [Capital Resources and Requirements](index=53&type=section&id=CAPITAL%20RESOURCES%20AND%20REQUIREMENTS) - As of March 31, 2023, Axos Financial, Inc. and Axos Bank met all capital adequacy requirements and were **"well capitalized"** under the regulatory framework[227](index=227&type=chunk) - The Company and Bank elected the **five-year CECL transition guidance** for calculating regulatory capital, which phases out 25% of the cumulative CECL adjustment per year starting fiscal year 2023[228](index=228&type=chunk) Regulatory Capital Ratios (March 31, 2023 vs. June 30, 2022) | Metric | Axos Financial, Inc. Mar 31, 2023 | Axos Financial, Inc. Jun 30, 2022 | Axos Bank Mar 31, 2023 | Axos Bank Jun 30, 2022 | Minimum Capital Ratio | "Well Capitalized" Ratio | | :----- | :-------------------------------- | :-------------------------------- | :--------------------- | :--------------------- | :-------------------- | :----------------------- | | Tier 1 leverage | 9.29% | 9.25% | 10.17% | 10.65% | 4.00% | 5.00% | | Common equity tier 1 capital | 10.71% | 9.86% | 11.55% | 11.24% | 4.50% | 6.50% | | Tier 1 capital | 10.71% | 9.86% | 11.55% | 11.24% | 6.00% | 8.00% | | Total capital | 13.63% | 12.73% | 12.40% | 12.01% | 8.00% | 10.00% | [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) Details the Company's exposure to market risk, primarily interest rate risk, and its management strategies [Banking Business](index=55&type=section&id=Banking%20Business%20(Market%20Risk)) - The Banking Business measures interest rate sensitivity as the difference between **interest-earning assets and interest-bearing liabilities** that mature or re-price within a given period[237](index=237&type=chunk) - The Bank's overall **asset sensitivity increased** at March 31, 2023, due to a cushion of additional liquidity created in response to unprecedented liquidity stress in the banking industry[243](index=243&type=chunk) Banking Business Net Interest Rate Sensitivity Gap (March 31, 2023) | Metric (in thousands) | Six Months or Less | Over Six Months Through One Year | Over One Year Through Five Years | Over Five Years | Total | | :-------------------- | :----------------- | :------------------------------- | :------------------------------- | :-------------- | :---- | | Net interest rate sensitivity gap | $4,616,613 | $(3,384,583) | $3,543,555 | $88,047 | $4,863,632 | | Cumulative gap | $4,616,613 | $1,232,030 | $4,775,585 | $4,863,632 | $4,863,632 | | Cumulative gap—as % of total interest earning assets | 24.83% | 6.63% | 25.69% | 26.16% | 26.16% | [Securities Business](index=56&type=section&id=Securities%20Business%20(Market%20Risk)) - The Securities Business is exposed to market risk from its role as a **financial intermediary** in customer, broker-dealer, and registered investment advisor transactions, including securities lending and trading activities[245](index=245&type=chunk) - Interest rate risk is managed by setting and monitoring **limits on the size and duration of positions** and the length of time securities can be held[246](index=246&type=chunk) - Credit risk from potential non-performance by counterparties, customers, or issuers is managed by **setting position limits, conducting credit reviews, and using central clearing organizations**[247](index=247&type=chunk) [ITEM 4. Controls and Procedures](index=57&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Confirms the effectiveness of disclosure controls and procedures as of the end of the reporting period - Management concluded that the Company's disclosure controls and procedures were **effective** as of March 31, 2023[248](index=248&type=chunk) - **No changes** in the Company's internal control over financial reporting materially affected, or are reasonably likely to materially affect, internal control over financial reporting during the quarter ended March 31, 2023[248](index=248&type=chunk) - Control systems provide **reasonable, not absolute, assurance**, and their effectiveness can be impacted by resource constraints, business conditions, or compliance deterioration[249](index=249&type=chunk) PART II – OTHER INFORMATION [ITEM 1. Legal Proceedings](index=58&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Discloses ongoing legal proceedings, including shareholder actions and a significant jury verdict - Six shareholder derivative actions were filed against the Company, with **two dismissed without prejudice** in March 2023, and others stayed pending resolution of a related wrongful termination lawsuit[108](index=108&type=chunk)[109](index=109&type=chunk) - A jury verdict in MUFG Union Bank, N.A. v. Axos Bank, et al awarded damages, which were reduced to **$7.8 million** for tortious interference after a settlement application. The Company accrued **$16 million** for this and believes it has substantial grounds for appeal[110](index=110&type=chunk) [ITEM 1A. Risk Factors](index=58&type=section&id=ITEM%201A.%20RISK%20FACTORS) Summarizes key business and industry risks that could impact the Company's financial results - The Company faces inherent business and industry risks, detailed in its **2022 Form 10-K** and supplemented by its Quarterly Report on Form 10-Q for the period ended December 31, 2022[252](index=252&type=chunk) - Actual results and timing of events could differ materially from forward-looking statements due to risks such as **changes in interest rates, government regulation, economic conditions, and litigation outcomes**[124](index=124&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=58&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Reports on common stock repurchases during the quarter and the authorization of a new buyback program - On April 26, 2023, the Board of Directors authorized a new program to repurchase up to **$100 million** of its common stock, in addition to the existing share repurchase plan[254](index=254&type=chunk) Common Stock Repurchases (Quarter Ended March 31, 2023) | Period | Number of Shares Purchased | Average Price Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares Yet Under or That May be Purchased Under the Plans or Programs (in thousands) | | :----- | :------------------------- | :---------------------- | :------------------------------------------------------------------------------- | :----------------------------------------------------------------------------------------------------------- | | March 1, 2023 to March 31, 2023 | 849,081 | $37.22 | 849,081 | $21,159 | | For the Three Months Ended March 31, 2023 | 849,081 | $37.22 | 849,081 | $21,159 | [ITEM 3. Defaults Upon Senior Securities](index=58&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) Reports no defaults upon senior securities during the period [ITEM 4. Mine Safety Disclosures](index=59&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) States that mine safety disclosures are not applicable [ITEM 5. Other Information](index=59&type=section&id=ITEM%205.%20OTHER%20INFORMATION) Indicates no other information is reported for the period [ITEM 6. Exhibits](index=59&type=section&id=ITEM%206.%20EXHIBITS) Lists the exhibits filed with the report, including required certifications and XBRL data - Exhibits include CEO and CFO certifications (**Sections 302 and 906 of Sarbanes-Oxley Act**) and Inline XBRL Taxonomy documents[256](index=256&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk) [Signatures](index=60&type=section&id=SIGNATURES) Provides the official signatures of the company's executive officers, dating the report - The report is signed by **Gregory Garrabrants, President and Chief Executive Officer**, and **Derrick K. Walsh, Executive Vice President and Chief Financial Officer**, on April 27, 2023[265](index=265&type=chunk)

Financial Data and Key Metrics Changes - The company reported net income of $82 million and earnings per share of $1.35 for Q2 2023, representing year-over-year growth of 34% and 35% respectively [8] - Book value per share increased by 16% year-over-year to $29.79 at December 31, 2022 [8] - Net interest margin was 4.49% for the second quarter, up 23 basis points from the previous quarter and up 39 basis points from the same quarter last year [9][23] Business Line Data and Key Metrics Changes - Deposits increased by approximately 28% year-over-year to $15.7 billion, with checking and savings deposits representing 93% of total deposits [8][18] - Ending net loans for investment balance were $15.5 billion, up 2% linked quarter or 7% annualized [9] - Loan originations for the quarter were $2 billion, down approximately 22% from the previous year [13] Market Data and Key Metrics Changes - The company experienced a 3% linked quarter increase in deposits, with growth in small business and consumer deposits offset by declines in certain commercial banking channels [18] - Cash sorting by Registered Investment Advisors (RIAs) increased, leading to a decline in cash balances held at Axos Advisory Services [21] Company Strategy and Development Direction - The company is focused on maintaining strong net interest margins in a competitive deposit market through diverse deposit franchises [8] - Investments in technology and operational efficiency are expected to improve the cost structure of the securities business [28] - The company plans to launch a new version of its consumer app in summer 2023, enhancing financial planning and investment features [29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving mid-teens loan growth in the second half of fiscal 2023, despite a deceleration in loan growth during Q2 [17][39] - The company is well-positioned to weather economic downturns due to strong capital levels and a low loan-to-value strategy [32] - Management noted that the competitive landscape for deposits has intensified, leading to increased marketing expenditures [37] Other Important Information - The efficiency ratio for the banking business was 47.11%, a significant improvement from the previous quarter [11] - Noninterest income for the quarter was $28.3 million, down from $30.8 million year-over-year, primarily due to a downturn in mortgage banking [34] Q&A Session Summary Question: Margin normalization and future rate increases - Management indicated that the margin is expected to normalize lower but may have potential for upside depending on future rate increases [42][43] Question: Loan growth expectations - Management expects mid-teens loan growth for the second half of the fiscal year, with specific drivers identified [48][49] Question: Auto charge-offs and insurance recovery - Management clarified that there is a lag in recovery from insurance on auto charge-offs, which is recorded under banking service fees [52][54] Question: Competitive lending environment - Management noted that while some banks are pulling back, there are still opportunities for growth, particularly in jumbo mortgages and C&I lending [58][60] Question: Return on equity evolution - Management expressed optimism about the potential for higher returns on equity in the long term, driven by improvements in the securities business [63][64] Question: Digital asset strategy - Management is cautious about the digital asset space, monitoring regulatory developments and consumer interest before making further commitments [67][69]

Axos Q2 Fiscal 2023 Earnings Supplement January 26, 2023 NYSE: AX Loan Growth by Category for Second Quarter Ended December 31, 2022 $ millions Single Family Mortgage & Warehouse Multifamily & Commercial Mortgage Commercial Real Estate Loans Commercial & Industrial Non-RE* Auto & Consumer Other Q1 FY23 Q2 FY23 Inc (Dec) $3,845 $3,833 $12 Jumbo Mortgage SF Warehouse Lending 144 177 (33) 2,175 2,127 48 Multifamily Small Balance Commercial 37 875 838 4,848 133 4,981 CRE Specialty 781 676 105 Lender Finance RE ...

Financial Performance - Axos Financial, Inc. reported net income of $81,552,000 for the three months ended December 31, 2022, compared to $60,787,000 for the same period in 2021, representing a 34% increase[130]. - Adjusted earnings for the same period were $83,354,000, up from $62,917,000 in 2021, reflecting a 32% year-over-year growth[130]. - The company’s adjusted earnings per diluted common share (EPS) increased to $1.38 for the three months ended December 31, 2022, compared to $1.04 in the prior year, marking a 32% rise[130]. - For the three months ended December 31, 2022, the company reported net income of $81.6 million, or $1.35 per diluted share, compared to $60.8 million, or $1.00 per diluted share for the same period in 2021, representing a 34.5% increase in net income[139]. - For the six months ended December 31, 2022, net income was $140.0 million, or $2.31 per diluted share, compared to $121.0 million, or $1.99 per diluted share for the same period in 2021, indicating a 15.7% increase in net income[139]. Assets and Equity - As of December 31, 2022, common stockholders' equity was $1,787,559,000, an increase from $1,523,157,000 in 2021, indicating a 17% growth[131]. - The company has approximately $18.7 billion in total assets, indicating a strong financial position[118]. - Total assets increased to $18,741,035 thousand as of December 31, 2022, up from $17,401,165 thousand as of June 30, 2022, reflecting an increase of 7.7%[135]. - Total assets for the company reached $17.4 billion as of December 31, 2022, compared to $13.5 billion as of December 31, 2021[173]. - Stockholders' equity increased by $144.6 million to $1.79 billion at December 31, 2022, driven by net income of $140.0 million for the six months ended December 31, 2022[207]. Income and Expenses - Net interest income for the three months ended December 31, 2022, was $199,910 thousand, compared to $145,568 thousand for the same period in 2021, marking a 37.2% increase[137]. - Total interest and dividend income for the six months ended December 31, 2022, increased 59.6% to $503.4 million compared to $315.4 million for the same period in 2021[140]. - Total interest expense for the three months ended December 31, 2022, was $79.7 million, an increase of 592.4% from $11.5 million in the same period of 2021[140]. - Total non-interest expenses increased to $107.5 million for Q4 2022 from $86.0 million in Q4 2021, driven by higher salaries, advertising, and professional services[154]. - Non-interest income decreased by $2.5 million to $28.3 million for Q4 2022 compared to Q4 2021, primarily due to lower mortgage banking income and prepayment penalty fee income[152]. Loans and Deposits - The company’s total deposits rose to $15,690,494 thousand as of December 31, 2022, compared to $13,946,422 thousand as of June 30, 2022, representing a 12.5% increase[135]. - Loan originations for investment totaled $2,013,576 thousand for the three months ended December 31, 2022, compared to $2,525,871 thousand for the same period in 2021, reflecting a decrease of 20.2%[137]. - Net loans held for investment rose by 9.8% to $15.5 billion at December 31, 2022, from $14.1 billion at June 30, 2022, due to loan originations of $4.5 billion[189]. - Total deposits rose by $1.7 billion, or 12.5%, to $15.69 billion at December 31, 2022, compared to $13.95 billion at June 30, 2022[198]. Capital and Ratios - The common equity tier 1 capital ratio was 10.55% as of December 31, 2022, up from 9.86% as of June 30, 2022, indicating improved capital strength[135]. - The Tier 1 capital ratio to risk-weighted assets was 10.55% as of December 31, 2022, exceeding the minimum requirement of 6.0%[220]. - The total capital ratio to risk-weighted assets was 13.49% as of December 31, 2022, above the minimum requirement of 10.0%[220]. - The company and Bank met all capital adequacy requirements as of December 31, 2022, and were classified as "well capitalized" under regulatory standards[216]. Interest Rate and Market Risk - The projected net interest income for the next 12 months is expected to increase by 6.5% to $893,723 under a 200 basis point increase scenario[230]. - The net present value of assets is projected to decrease by 5.8% to $1,710,148 under a 200 basis point increase in interest rates[232]. - Interest rate risk is managed by setting limits on the size and duration of positions in the Securities Business[235]. - The company is exposed to market risk through its Securities Business, which includes trading activities and securities lending[233]. Operational Efficiency - The efficiency ratio improved to 47.11% for the three months ended December 31, 2022, down from 48.78% for the same period in 2021, indicating better operational efficiency[137]. - The efficiency ratio for the Banking Business segment increased to 46.05% for the three months ended December 31, 2022, compared to 39.39% for the same period in 2021[171].

Financial Data and Key Metrics Changes - The company reported adjusted net income of $69.6 million for Q1 2023, representing a year-over-year growth of 15.6% [8][10] - Book value per share increased to $28.35, also up 15.6% year-over-year [8] - Net interest margin was 4.26%, up from 4.19% in the previous quarter and 4.22% year-over-year [9][10] - Total allowance for credit losses was $155.5 million, representing 1% of total loans [11][25] Business Line Data and Key Metrics Changes - Deposits increased by approximately 29% year-over-year to $15.2 billion, with noninterest-bearing deposits representing about 30% of total deposits [8][15] - Ending net loans for investment balances were $15.2 billion, up 28.1% annualized [8] - Loan originations for the quarter were $2.5 billion, up approximately 19% from the previous year [11] - Axos Securities contributed approximately $3.3 billion in total deposits, benefiting from higher cash balances due to market volatility [9][17] Market Data and Key Metrics Changes - The company experienced strong demand for well-secured commercial and industrial (C&I) loans, with a backlog of approximately $790 million as of October 24, 2022 [13] - The jumbo single-family mortgage pipeline was approximately $311 million as of October 24, 2022 [13] - The company noted a decline in prepayments in the jumbo single-family mortgage business, down to $184.3 million from $390 million in the prior quarter [13] Company Strategy and Development Direction - The company aims to achieve mid-teens loan growth for fiscal 2023, despite expectations of moderation in loan growth due to higher interest rates [15][23] - Investments in cash and treasury management capabilities are expected to increase the pipeline of prospective new clients [16] - The company is focusing on enhancing its technology and operational capabilities to improve efficiency and reduce costs [20][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining a net interest margin above the long-term target of 3.8% to 4% [23] - The company anticipates that the competitive landscape will provide opportunities for market share growth, particularly in the advisory services sector [45] - Management highlighted the importance of managing credit quality and operational efficiencies in the current uncertain environment [26][25] Other Important Information - The efficiency ratio was reported at 55.9%, up from 54.4% in the prior quarter, primarily due to a $16 million legal reserve [21][29] - The company plans to appeal an unfavorable legal judgment related to its Axos Fiduciary Services business, which resulted in a $10.3 million net award [21] Q&A Session Summary Question: Can you walk us through the fee income at the securities business? - Management explained that the large delta in fee income is primarily due to cash sorting deposits held at the bank, which are eliminated in noninterest income and expense lines [35] Question: What is the loan deposit ratio and how is it monitored? - Management indicated that they typically run slightly above 1.05 for the loan deposit ratio and feel comfortable with their deposit sourcing capabilities [37] Question: What is the expected run rate for expenses going forward? - Management suggested that the efficiency ratio would remain around 42% to 50% on a consolidated basis, factoring in the recent legal charge [40] Question: How does the competitive landscape affect market share? - Management noted that the acquisition of TV by Schwab presents an opportunity for Axos to capture market share as advisers seek alternatives [45] Question: What is the outlook for the specialty CRE market? - Management indicated continued demand for multifamily construction projects and noted that the current market conditions could benefit banks with stable funding sources [51][53]

Financial Performance - Axos Financial, Inc. reported net income of $58.4 million for the three months ended September 30, 2022, compared to $60.2 million for the same period in 2021, reflecting a decrease of approximately 3%[128] - Adjusted earnings for the same period were $71.6 million, up from $62.2 million year-over-year, representing an increase of about 15%[128] - The adjusted earnings per diluted common share increased to $1.18 from $1.03, marking a growth of approximately 14.6%[128] - Net income for the three months ended September 30, 2022, was $58.4 million, or $0.97 per diluted share, compared to $60.2 million, or $0.99 per diluted share for the same period in 2021[137] Assets and Equity - Common stockholders' equity rose to $1.7 billion as of September 30, 2022, compared to $1.46 billion a year earlier, indicating an increase of about 16.5%[129] - The Company has approximately $18.4 billion in total assets, indicating a diversified financial services portfolio[117] - Total assets increased to $18.4 billion as of September 30, 2022, compared to $14.9 billion as of September 30, 2021[133] - Total assets increased to $17,640.6 million in 2022 from $14,502.4 million in 2021, representing a growth of 21.4%[1] Income and Expenses - Net interest income increased by 23.1% to $180.5 million for the three months ended September 30, 2022, compared to $146.6 million for the same period in 2021[138] - Total interest and dividend income rose by 41.4% to $223.8 million for the three months ended September 30, 2022, compared to $158.3 million in the same period of 2021[139] - Total non-interest expenses increased to $116.1 million in 2022 from $84.4 million in 2021, marking a rise of 37.5%[1] - Non-interest income was $27.2 million for the three months ended September 30, 2022, compared to $26.7 million for the same period in 2021[135] Loans and Credit Losses - Provision for credit losses was $8.75 million for the three months ended September 30, 2022, compared to $4.0 million for the same period in 2021[135] - The average balance of loans increased by 26.6% for the three months ended September 30, 2022, compared to the same period in 2021[139] - Net loans held for investment rose 8.0% to $15.2 billion at September 30, 2022, up from $14.1 billion at June 30, 2022, driven by loan originations of $2.5 billion[177] - The provision for credit losses was $8.8 million for the three months ended September 30, 2022, compared to $4.0 million for the same period in 2021[185] Banking and Securities Segments - The Banking Business segment focuses on online banking and lending services, while the Securities Business segment includes clearing and advisory services[120] - For the three months ended September 30, 2022, the Banking Business segment reported income before taxes of $80.9 million, a decrease from $90.3 million in the same period of 2021, attributed to increased non-interest expenses and provisions for credit losses[162] - The Securities Business segment reported income before taxes of $8.9 million for the three months ended September 30, 2022, compared to $9 thousand in the same period of 2021, due to higher non-interest income[172] Regulatory and Capital Adequacy - The Company is subject to regulation by the Federal Reserve and the OCC, ensuring compliance with financial standards[117] - The Company and Bank met all capital adequacy requirements as of September 30, 2022, and were classified as "well capitalized" under regulatory standards[204] - The Tier 1 capital ratio was 9.97% as of September 30, 2022, compared to 9.86% as of June 30, 2022[206] Market and Risk Exposure - The Securities Business is exposed to market risk primarily due to fluctuations in interest rates and market prices, impacting customer transactions and trading activities[221] - The net present value of assets decreased by 4.1% to $1,856,089 thousand with a 200 basis point increase in interest rates[220]

[Business Overview](index=5&type=section&id=Item%201.%20Business) Axos Financial, Inc. is a diversified financial services holding company with over **$17.4 billion** in assets, focused on technology-driven growth and strong financial targets [Company Profile and Strategy](index=5&type=section&id=Overview) Axos Financial, Inc. is a diversified financial services holding company with over **$17.4 billion** in assets, focused on technology-driven growth and strong financial targets - As of June 30, 2022, Axos Financial had total assets of **$17.4 billion**, loans of **$14.1 billion**, and deposits of **$13.9 billion**[10](index=10&type=chunk) - The company's long-term business objectives include maintaining an annualized return on average common stockholders' equity of **17.0%** or better, increasing average interest-earning assets by **12%** or more annually, and maintaining an annualized efficiency ratio at the Bank of **40%** or lower[12](index=12&type=chunk) [Business Segments](index=6&type=section&id=Segment%20Information) The company operates through its Banking Business, offering diverse digital services, and its Securities Business, providing clearing, custody, and advisory services [Banking Business](index=6&type=section&id=BANKING%20BUSINESS) The Banking Business offers a wide range of online and concierge banking, lending, and specialized deposit products, primarily through digital channels - The Banking Business provides a wide range of services including online and concierge banking, mortgage, vehicle, and unsecured lending, focusing on deposit products for specific industry verticals and commercial lending[14](index=14&type=chunk) - The bank utilizes diverse distribution channels, including a national online brand, affinity groups, a commercial banking division, a remote lending sales force, and specialized fiduciary services to generate loans and deposits[19](index=19&type=chunk) [Securities Business](index=16&type=section&id=SECURITIES%20BUSINESS) The Securities Business, through Axos Clearing and Axos Invest, provides clearing, custody, and digital advisory services to financial organizations and retail customers - The Securities Business, through Axos Clearing, offers fully disclosed clearing services to **275** financial organizations, including broker-dealers and RIAs, as of June 30, 2022[72](index=72&type=chunk) - Through Axos Invest, the company provides both self-directed trading and digital advisory services to retail customers, integrated into its universal digital banking platform[75](index=75&type=chunk) [Loan Portfolio](index=7&type=section&id=Banking%20Business%20-%20Asset%20Origination%20and%20Fee%20Income%20Businesses) The company's diverse loan portfolio, concentrated in Commercial Real Estate and California, shows strong commercial growth with a conservative **56%** weighted average LTV Loan Portfolio Composition (in thousands) | Loan Type | 2022 Amount (in thousands) | 2022 Percent | 2021 Amount (in thousands) | 2021 Percent | 2020 Amount (in thousands) | 2020 Percent | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Single Family - Mortgage & Warehouse | $3,988,462 | 28.0% | $4,359,472 | 37.8% | $4,722,304 | 44.2% | | Multifamily and Commercial Mortgage | $2,877,680 | 20.2% | $2,470,454 | 21.4% | $2,263,054 | 21.1% | | Commercial Real Estate | $4,781,044 | 33.5% | $3,180,453 | 27.5% | $2,297,920 | 21.5% | | Commercial & Industrial - Non-RE | $2,028,128 | 14.2% | $1,123,869 | 9.7% | $885,320 | 8.3% | | Auto & Consumer | $567,228 | 4.0% | $362,180 | 3.1% | $341,365 | 3.1% | | Other | $11,134 | 0.1% | $58,316 | 0.5% | $193,479 | 1.8% | | **Total loans held for investment** | **$14,253,676** | **100.0%** | **$11,554,744** | **100.0%** | **$10,703,442** | **100.0%** | - The real estate mortgage loan portfolio is heavily concentrated in California, which accounts for **45.4%** of the total portfolio (**35.2%** in Southern California and **10.2%** in Northern California), with New York as the next largest concentration at **26.0%**[39](index=39&type=chunk) Loan-to-Value (LTV) Ratios by Portfolio at June 30, 2022 | | Total Real Estate Mortgage Loans | Single Family - Mortgage & Warehouse | Multifamily and Commercial Mortgage | Commercial Real Estate | | :--- | :--- | :--- | :--- | :--- | | Weighted Average LTV | 56% | 57% | 53% | 58% | | Median LTV | 54% | 56% | 50% | 26% | - The bank's lending limit to a single borrower was **$258.8 million** as of June 30, 2022, with the largest outstanding loan balance being **$190.0 million**[45](index=45&type=chunk) [Deposit Portfolio](index=13&type=section&id=Banking%20Business%20-%20Deposit%20Generation) Total deposits reached **$13.9 billion** as of June 30, 2022, driven by strong growth in non-interest-bearing deposits, with the average rate paid on interest-bearing deposits decreasing Total Deposits by Type (in thousands) | Deposit Type | June 30, 2022 (in thousands) | June 30, 2021 (in thousands) | June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | | Non-interest-bearing | $5,033,970 | $2,474,424 | $1,936,661 | | Interest-bearing demand | $3,611,889 | $3,369,845 | $3,456,127 | | Savings | $4,245,555 | $3,458,687 | $3,697,188 | | Time deposits | $1,055,008 | $1,512,841 | $2,246,718 | | **Total deposits** | **$13,946,422** | **$10,815,797** | **$11,336,694** | - The average rate paid on total interest-bearing deposits decreased to **0.42%** in fiscal year 2022, compared to **0.67%** in 2021 and **1.73%** in 2020[66](index=66&type=chunk) - At June 30, 2022, consumer and business deposits represented **53.7%** and **46.3%** of total deposits, respectively[60](index=60&type=chunk) [Funding and Borrowings](index=17&type=section&id=BORROWINGS) Axos utilizes FHLB advances, lines of credit, and subordinated notes for funding, with significant borrowing capacity and recent subordinated note issuances - As of June 30, 2022, the bank had **$117.5 million** in FHLB advances outstanding, with an additional **$2.0 billion** immediately available and a further **$3.9 billion** available with additional collateral[77](index=77&type=chunk) - The bank has access to the Federal Reserve Bank discount window with a total borrowing capacity of approximately **$2.8 billion** as of June 30, 2022, none of which was outstanding[78](index=78&type=chunk) - In February 2022, the company issued **$150.0 million** of **4.0%** Fixed-to-Floating Rate Subordinated Notes due 2032, following a **$175.0 million** issuance of notes due 2030 in September 2020[85](index=85&type=chunk)[83](index=83&type=chunk) [Mergers and Acquisitions](index=18&type=section&id=MERGERS%20AND%20ACQUISITIONS) Axos Clearing, LLC acquired E*TRADE Advisor Services (EAS) for **$54.8 million** in cash, rebranding it as AAS to enhance fee income and deposits - Axos Clearing, LLC acquired E*TRADE Advisor Services (EAS) on August 2, 2021, for a cash purchase price of **$54.8 million**, rebranding the business as Axos Advisor Services (AAS)[87](index=87&type=chunk) [Supervision and Regulation](index=20&type=section&id=SUPERVISION%20AND%20REGULATION) Axos Financial, Inc. operates under extensive regulation by the Federal Reserve, OCC, FDIC, SEC, and FINRA, adhering to stringent capital and consumer protection rules - Axos Financial, Inc. is a financial holding company regulated by the Federal Reserve, while Axos Bank is a federal savings bank regulated by the OCC and FDIC[98](index=98&type=chunk)[100](index=100&type=chunk) - The company and the bank are subject to Basel III capital rules, requiring minimum CET1, Tier 1, and Total risk-based capital ratios, plus a capital conservation buffer, exceeding 'well-capitalized' thresholds as of June 30, 2022[101](index=101&type=chunk)[103](index=103&type=chunk)[106](index=106&type=chunk) - With over **$10 billion** in assets, the Bank is subject to direct supervision by the Consumer Financial Protection Bureau (CFPB) and is impacted by the Durbin Amendment, which reduces debit card interchange fees[133](index=133&type=chunk)[134](index=134&type=chunk) - The company's broker-dealer subsidiaries are subject to extensive regulation, including the SEC's Net Capital Rule (Rule 15c3-1) and Customer Protection Rule (Rule 15c3-3)[143](index=143&type=chunk)[147](index=147&type=chunk)[150](index=150&type=chunk) [Risk Factors](index=28&type=section&id=Item%201A.%20Risk%20Factors) The company faces diverse risks including macroeconomic shifts, regulatory changes, operational challenges, and technology vulnerabilities inherent in its financial services business [Macroeconomic and Market Risks](index=28&type=section&id=Risks%20Relating%20to%20Macroeconomic%20Conditions) The company's performance is highly sensitive to macroeconomic conditions, especially interest rate changes and economic downturns, with significant exposure to LIBOR transition risk - Changes in interest rates directly affect net interest income, with the Federal Reserve's rate increases in 2022 to combat inflation being a key factor[155](index=155&type=chunk) - As of June 30, 2022, approximately **$9.1 billion**, or **64%** of the total loan portfolio, was indexed to LIBOR, which is set to be discontinued after June 30, 2023, creating transition risk[164](index=164&type=chunk) - The business is susceptible to economic downturns, with a high concentration of loans (**45.4%**) secured by real estate in California, making it vulnerable to that state's economy[158](index=158&type=chunk)[179](index=179&type=chunk) [Regulatory and Legal Risks](index=30&type=section&id=Risks%20Relating%20to%20Regulation%20of%20our%20Business) Operating in a highly regulated industry exposes Axos to risks from changing laws, regulations, and enforcement activities by multiple agencies, potentially leading to increased costs or litigation - The company is subject to extensive oversight from multiple federal and state regulators, and changes in regulations could increase costs or restrict growth[170](index=170&type=chunk)[171](index=171&type=chunk) - The broker-dealer and investment advisory businesses are subject to risks of censure, fines, or suspension from the SEC and FINRA for violations of securities laws[175](index=175&type=chunk) - The company is subject to shareholder lawsuits, including class actions and derivative actions, which can be costly and time-consuming to defend[240](index=240&type=chunk) [Business and Operational Risks](index=33&type=section&id=Risks%20Relating%20to%20our%20Business%20Operations) The company faces operational risks from accounting estimates like ACL, the growing C&I loan portfolio, broker-dealer market and credit risks, and challenges in managing rapid growth - The allowance for credit losses (ACL) is a critical accounting estimate, and an insufficient allowance, especially for the growing C&I portfolio, could materially harm earnings and capital[190](index=190&type=chunk)[191](index=191&type=chunk) - The broker-dealer business is subject to market risk from equity price movements, credit risk from counterparty failures, and increased litigation risk, as evidenced by a **$15.3 million** bad debt expense in March 2019 from a correspondent default[198](index=198&type=chunk) - The company's planned digital asset subsidiary (Axos Digital Assets LLC) will face risks from cryptocurrency price volatility, cybersecurity vulnerabilities, and evolving regulations[201](index=201&type=chunk) - The company's ability to manage its substantial growth in assets and deposits is critical; failure to deploy new deposits into profitable assets could decrease profitability[206](index=206&type=chunk)[207](index=207&type=chunk) [Technology and Security Risks](index=38&type=section&id=Technology%20Risks%20in%20our%20Online%20Business) As a primarily online bank, Axos is heavily reliant on technology, facing significant risks from third-party provider dependence and cybersecurity threats - The company relies on third-party service providers for core banking and securities transaction technology, and any interruption could materially impair services[222](index=222&type=chunk)[223](index=223&type=chunk) - Cybersecurity attacks (e.g., hacking, ransomware) pose a significant risk of data breaches, which could lead to financial loss, litigation, and loss of customer confidence[229](index=229&type=chunk)[230](index=230&type=chunk)[231](index=231&type=chunk) - Failure to effectively implement new technology initiatives or anticipate future technology demands could adversely affect business and financial results[232](index=232&type=chunk)[233](index=233&type=chunk) [Management's Discussion and Analysis (MD&A)](index=46&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides a comprehensive analysis of Axos Financial's financial condition and results of operations, highlighting key performance drivers and balance sheet changes [Financial Highlights and Overview](index=46&type=section&id=OVERVIEW) Axos reported **$240.7 million** net income in FY2022, an **11.6%** increase, driven by higher net interest income, strong asset and deposit growth, and the AAS acquisition Key Financial Performance | Metric | FY 2022 | FY 2021 | FY 2020 | | :--- | :--- | :--- | :--- | | Net Income (in millions) | $240.7 | $215.7 | $183.4 | | Diluted EPS | $3.97 | $3.56 | $2.98 | | Total Assets (in billions) | $17.4 | $14.3 | $13.9 | | Net Interest Income (in millions) | $607.2 | $538.7 | $477.6 | | Return on Average Assets | 1.57% | 1.52% | 1.53% | | Return on Average Common Equity | 15.61% | 16.51% | 15.65% | - Total assets grew by **$3.1 billion** (**22.0%**) in fiscal 2022, primarily due to strong loan originations in commercial real estate and C&I lending[265](index=265&type=chunk) - The acquisition of E*TRADE Advisor Services (AAS) on August 2, 2021, was a key event, contributing to higher advisory fee income[263](index=263&type=chunk)[266](index=266&type=chunk) [Results of Operations](index=52&type=section&id=RESULTS%20OF%20OPERATIONS) Profitability improved in FY2022 with net interest income rising to **$607.2 million**, driven by loan growth and lower funding costs, alongside increased non-interest income from AAS [Comparison of Fiscal Years 2022 and 2021](index=52&type=section&id=COMPARISON%20OF%20THE%20FISCAL%20YEARS%20ENDED%20JUNE%2030,%202022%20AND%20JUNE%2030,%202021) FY2022 saw net interest income increase by **$68.4 million** to **$607.2 million**, driven by asset growth and lower funding costs, with non-interest income rising due to AAS - Net interest income increased by **$68.4 million** (**12.7%**) to **$607.2 million** in FY2022. This was driven by a **$937.4 million** increase in average interest-earning assets, while interest expense decreased by **$26.6 million** due to a lower cost of funds and a **$1.7 billion** increase in non-interest bearing deposits[261](index=261&type=chunk)[285](index=285&type=chunk)[286](index=286&type=chunk) - Provision for credit losses decreased to **$18.5 million** from **$23.8 million**, reflecting favorable changes in economic conditions post-COVID-19, partially offset by loan growth[288](index=288&type=chunk) Non-Interest Income Breakdown (in thousands) | Category | FY 2022 (in thousands) | FY 2021 (in thousands) | | :--- | :--- | :--- | | Prepayment penalty fee income | $13,303 | $7,166 | | Mortgage banking income | $19,033 | $42,150 | | Advisory fee income | $29,230 | $— | | Broker-dealer fee income | $22,880 | $26,317 | | Banking and service fees | $28,752 | $29,137 | | **Total non-interest income** | **$113,363** | **$105,261** | - Non-interest expense increased by **$47.6 million** (**15.1%**) to **$362.1 million**, driven by the AAS acquisition, a **14.6%** increase in full-time staff, higher data processing costs, and a one-time **$11.0 million** charge for a contractual claim[292](index=292&type=chunk)[294](index=294&type=chunk) [Comparison of Fiscal Years 2021 and 2020](index=58&type=section&id=COMPARISON%20OF%20THE%20FISCAL%20YEARS%20ENDED%20JUNE%2030,%202021%20AND%20JUNE%2030,%202020) FY2021 saw net interest income increase by **$61.1 million** to **$538.7 million**, primarily due to a sharp decrease in interest expense, with provision for credit losses declining - Net interest income increased by **$61.1 million** (**12.8%**) to **$538.7 million** in FY2021, as a **$66.1 million** decrease in interest expense more than offset a **$5.0 million** decline in interest income, with the average rate paid on interest-bearing liabilities falling sharply from **1.72%** to **0.79%**[314](index=314&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk) - Provision for credit losses decreased to **$23.8 million** from **$42.2 million**, primarily due to non-recurring provisions for Refund Advance loans in FY2020[319](index=319&type=chunk) - Non-interest income increased slightly to **$105.3 million**, with a **$21.5 million** increase in mortgage banking income largely offset by a **$17.1 million** decrease in banking service fees due to the termination of the H&R Block partnership[322](index=322&type=chunk) [Segment Performance Analysis](index=54&type=section&id=SEGMENT%20RESULTS) The Banking Business remains the primary profit driver, with **$366.1 million** pre-tax income in FY2022, while the Securities Business reported a wider pre-tax loss Segment Pre-Tax Income (Loss) (in thousands) | Segment | FY 2022 (in thousands) | FY 2021 (in thousands) | | :--- | :--- | :--- | | Banking Business | $366,135 | $328,564 | | Securities Business | $(2,365) | $(1,722) | | Corporate/Eliminations | $(23,811) | $(21,099) | | **Total Income Before Taxes** | **$339,959** | **$305,743** | [Banking Business Segment](index=55&type=section&id=Banking%20Business) The Banking segment's pre-tax income grew **11.4%** to **$366.1 million** in FY2022, driven by a **13.3%** increase in net interest income, with an improved efficiency ratio - The Banking segment's pre-tax income grew **11.4%** to **$366.1 million** in FY2022, driven by a **13.3%** increase in net interest income to **$597.8 million**[299](index=299&type=chunk)[306](index=306&type=chunk) Banking Segment Key Performance Ratios | Ratio | June 30, 2022 | June 30, 2021 | | :--- | :--- | :--- | | Efficiency ratio | 41.61% | 41.95% | | Return on average assets | 1.64% | 1.76% | | Net interest margin | 4.36% | 4.11% | [Securities Business Segment](index=57&type=section&id=Securities%20Business) The Securities segment's non-interest income more than doubled to **$64.1 million** in FY2022 due to the AAS acquisition, despite a **74.6%** increase in non-interest expense - The Securities segment's non-interest income more than doubled to **$64.1 million** in FY2022 from **$27.6 million** in FY2021, primarily due to **$28.3 million** in new custody and mutual fund fees from the AAS acquisition[310](index=310&type=chunk)[311](index=311&type=chunk) - Non-interest expense for the segment increased by **74.6%** to **$84.0 million**, largely due to higher salaries and other costs associated with the integration of AAS[312](index=312&type=chunk) Axos Clearing Key Metrics | Metric | FY 2022 (in thousands) | FY 2021 (in thousands) | | :--- | :--- | :--- | | FDIC insured program balances (end of period) | $3,452,358 | $730,248 | | Customer margin balances (end of period) | $285,894 | $327,148 | | Total tickets | 1,236,292 | 2,053,362 | [Analysis of Financial Condition](index=65&type=section&id=COMPARISON%20OF%20FINANCIAL%20CONDITION%20AT%20JUNE%2030,%202022%20AND%20JUNE%2030,%202021) The balance sheet expanded significantly in FY2022, with total assets growing **22.0%** to **$17.4 billion**, primarily funded by increased deposits and retained earnings - Total assets increased by **$3.1 billion** to **$17.4 billion** at June 30, 2022, from **$14.3 billion** at June 30, 2021[349](index=349&type=chunk) - Total liabilities increased by **$2.9 billion**, driven by a **$3.1 billion** growth in deposits, while FHLB advances decreased by **$0.2 billion**[349](index=349&type=chunk) - Stockholders' equity increased by **$242.0 million** to **$1.6 billion**, primarily due to **$240.7 million** in net income[349](index=349&type=chunk)[350](index=350&type=chunk) [Asset Quality and Allowance for Credit Losses](index=67&type=section&id=ASSET%20QUALITY%20AND%20ALLOWANCE%20FOR%20CREDIT%20LOSSES%20-%20LOANS) Asset quality improved in FY2022, with total non-performing assets decreasing to **$119.0 million**, and the ACL increasing to **$148.6 million** (**1.04%** of total loans) Non-Performing Assets (in thousands) | Category | June 30, 2022 (in thousands) | June 30, 2021 (in thousands) | June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | | Total non-performing loans | $118,194 | $145,195 | $87,941 | | Foreclosed real estate & repossessed vehicles | $798 | $6,782 | $6,408 | | **Total non-performing assets** | **$118,992** | **$151,977** | **$94,349** | | NPA as % of Total Assets | 0.68% | 1.10% | 0.68% | Allowance for Credit Losses (ACL) Roll-Forward (in thousands) | | FY 2022 (in thousands) | FY 2021 (in thousands) | | :--- | :--- | :--- | | Beginning Balance | $132,958 | $75,807 | | Effect of ASC 326 Adoption | — | $47,300 | | Provision for credit losses | $18,500 | $23,750 | | Charge-offs | $(4,428) | $(16,558) | | Recoveries | $1,587 | $2,659 | | **Ending Balance** | **$148,617** | **$132,958** | - The ACL as a percentage of total loans held for investment was **1.04%** at June 30, 2022, compared to **1.15%** at June 30, 2021[363](index=363&type=chunk) [Liquidity and Capital Resources](index=69&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company maintains a strong liquidity and capital position, with significant borrowing capacity and both the holding company and bank exceeding 'well-capitalized' thresholds Regulatory Capital Ratios (Company) at June 30, 2022 | Ratio | Actual | Minimum Requirement | Minimum to be Well Capitalized | | :--- | :--- | :--- | :--- | | Tier 1 leverage ratio | 9.25% | 4.00% | N/A | | Common equity tier 1 capital ratio | 9.86% | 7.00%* | N/A | | Tier 1 risk-based capital ratio | 9.86% | 8.50%* | N/A | | Total risk-based capital ratio | 12.73% | 10.50%* | N/A | *Includes capital conservation buffer. Regulatory Capital Ratios (Bank) at June 30, 2022 | Ratio | Actual | Minimum Requirement | Minimum to be Well Capitalized | | :--- | :--- | :--- | :--- | | Tier 1 leverage ratio | 10.65% | 4.00% | 5.00% | | Common equity tier 1 capital ratio | 11.24% | 7.00%* | 6.50% | | Tier 1 risk-based capital ratio | 11.24% | 8.50%* | 8.00% | | Total risk-based capital ratio | 12.01% | 10.50%* | 10.00% | *Includes capital conservation buffer. - Axos Clearing maintained excess net capital of **$32.7 million** above its requirement as of June 30, 2022[387](index=387&type=chunk) [Market Risk Analysis](index=72&type=section&id=QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate risk, actively monitored through NII and MVE sensitivity analyses, indicating an asset-sensitive position Net Interest Income (NII) Sensitivity at June 30, 2022 | Rate Shock | NII Change (First 12 Months) | NII Change (Next 12 Months) | | :--- | :--- | :--- | | Up 200 bps | +9.2% | +10.2% | | Down 100 bps | -5.0% | -5.8% | Market Value of Equity (MVE) Sensitivity at June 30, 2022 | Rate Shock | MVE Change from Base | MVE as % of Assets | | :--- | :--- | :--- | | Up 300 bps | -8.8% | 11.2% | | Up 200 bps | -4.6% | 11.5% | | Up 100 bps | -1.3% | 11.8% | | Down 100 bps | -2.0% | 11.5% | [Non-GAAP Financial Measures](index=66&type=section&id=USE%20OF%20NON-GAAP%20FINANCIAL%20MEASURES) The company uses non-GAAP measures like adjusted earnings and tangible book value to provide alternative performance views, with FY2022 adjusted earnings at **$256.5 million** Reconciliation of Net Income to Adjusted Earnings (Non-GAAP) (in thousands) | | FY 2022 (in thousands) | FY 2021 (in thousands) | FY 2020 (in thousands) | | :--- | :--- | :--- | :--- | | Net income | $240,716 | $215,707 | $183,438 | | Acquisition-related costs | $11,355 | $9,826 | $10,108 | | Other costs | $10,975 | $— | $— | | Tax effect of adjustments | $(6,519) | $(2,894) | $(3,048) | | **Adjusted earnings (Non-GAAP)** | **$256,527** | **$222,639** | **$190,498** | Reconciliation to Tangible Book Value per Share (Non-GAAP) | (in thousands, except per share) | June 30, 2022 (in thousands) | June 30, 2021 (in thousands) | June 30, 2020 (in thousands) | | :--- | :--- | :--- | :--- | | Total stockholders' equity | $1,642,973 | $1,400,936 | $1,230,846 | | Less: Goodwill and intangibles, MSRs, etc. | $(181,618) | $(133,883) | $(141,064) | | **Tangible common stockholders' equity** | **$1,461,355** | **$1,267,053** | **$1,089,719** | | Common shares outstanding | 59,777,949 | 59,317,944 | 59,612,635 | | **Tangible book value per common share** | **$24.45** | **$21.36** | **$18.28** | [Shareholder and Other Information](index=43&type=section&id=PART%20II) This section covers common equity market information, legal proceedings, and the company's internal controls and procedures for financial reporting [Market for Common Equity and Shareholder Matters](index=43&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Axos common stock trades on the NYSE, with the company retaining earnings for growth and a **$52.8 million** stock repurchase program remaining - The company has a stock repurchase program with **$52.8 million** remaining under its authorization as of June 30, 2022, with no shares repurchased in the fourth quarter of fiscal 2022[248](index=248&type=chunk)[252](index=252&type=chunk) - The company does not pay cash dividends on its common stock and intends to retain earnings to finance growth[246](index=246&type=chunk) - During fiscal year 2022, **330,396** restricted stock unit award shares were retained by the company to fund grantees' income tax obligations[249](index=249&type=chunk) [Legal Proceedings](index=42&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in several legal proceedings, including class action and shareholder derivative lawsuits, with settlement agreements reached in two class action cases - The company has reached settlement agreements in two putative class action lawsuits (the Golden Case and the Mandalevy Case), which are pending final court approval, with the settlement amounts not material[680](index=680&type=chunk)[682](index=682&type=chunk) - Several shareholder derivative actions filed against the company and certain officers/directors have been consolidated, stayed, or dismissed, with some aspects remaining on appeal or remand[684](index=684&type=chunk)[685](index=685&type=chunk)[686](index=686&type=chunk) [Controls and Procedures](index=76&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting (ICFR) were effective as of June 30, 2022 - Management and the independent auditor, BDO USA, LLP, concluded that the company's internal control over financial reporting was effective as of June 30, 2022[416](index=416&type=chunk)[417](index=417&type=chunk) - The assessment of internal controls excluded the recently acquired E*TRADE Advisor Services (AAS) business, acquired on August 2, 2021, which is permissible for one year post-acquisition[416](index=416&type=chunk)[424](index=424&type=chunk)

Financial Data and Key Metrics Changes - The company reported net income of $57.9 million for Q4 2022, representing a year-over-year growth of 6.7%, and $240.7 million for the fiscal year, an increase of 11.6% [9] - Book value per share increased by 16.3% year-over-year to $27.48 [9] - Net interest margin for Q4 2022 was 4.21%, up 19 basis points from the previous quarter and 29 basis points from the same quarter last year [9][10] - The efficiency ratio for the banking business segment was 46.7% for Q4 2022, which would have been 40.6% excluding a one-time charge of $11 million [11][18] Business Line Data and Key Metrics Changes - Total loan originations for Q4 2022 were $3.2 billion, a 41% increase from $2.3 billion in the same quarter last year [12] - Ending net loans for investment balances were $14.1 billion, up 7.6% linked quarter and 30.4% annualized [9] - C&I loan originations were $2.1 billion, reflecting strong growth across various lending sectors [16] - Auto lending saw ending loan balances increase by 8.7% linked quarter [17] Market Data and Key Metrics Changes - Deposits grew by 9.5% linked quarter to $13.9 billion, with consumer deposits comprising 54% of total deposits [20] - Non-interest bearing deposits increased by approximately $900 million from the previous quarter, representing 36% of total deposits [10][21] - The weighted average demand and savings deposit costs were 29 basis points for Q4 2022, compared to 14 basis points in the previous quarter [21] Company Strategy and Development Direction - The company aims to maintain a net interest margin above its long-term target of 3.8% to 4% and expects mid-teens loan growth for fiscal 2023 [27][33] - Investments in technology and infrastructure are ongoing to enhance operational efficiency and support growth initiatives [36] - The company is focused on expanding its advisory services and increasing assets under custody, targeting a $1 billion growth in this area [51][33] Management's Comments on Operating Environment and Future Outlook - Management noted that while rising interest rates and economic uncertainty present challenges, the company is well-positioned due to its efficient operations and strong credit quality [16][30] - The outlook for loan growth remains positive, with expectations for continued demand across multiple loan categories [33] - Management anticipates that the net interest margin will remain stable, influenced by loan portfolio growth and advisory deposit levels [27][29] Other Important Information - The company added $6 million to its loan loss provision in Q4 2022, reflecting strong loan growth [31] - The total allowance for credit losses was $148.6 million, representing 1.04% of total loans [32] - The company has access to approximately $2 billion of Federal Home Loan Bank borrowings, providing additional liquidity [34] Q&A Session Summary Question: Growth and Competition - Management indicated that while growth is expected to continue, there may be reduced activity in the market due to financial tightening conditions, which have also reduced competition, particularly in the non-bank sector [46][48] Question: Deposit Growth from New Clients - Management targets $1 billion growth in assets under custody, primarily engaging with smaller RIAs, with expectations for meaningful growth over time [51] Question: On-Balance Sheet Deposits - Management discussed the regulatory limitations on certain cash components, indicating that some cash will likely remain off-balance sheet due to these restrictions [55] Question: Balance Sheet Management - Management confirmed the need to maintain a level of deposits at third-party banks to ensure access to those banks over time [60] Question: Expense Growth Rate - Management provided guidance on maintaining a banking efficiency ratio between 41% and 42%, with expected growth in non-interest expenses due to increased headcount and marketing efforts [72]