Company Overview - Axos Financial (AX) is expected to report a year-over-year increase in earnings, with a consensus estimate of $1.39 per share, reflecting a change of +0.7% [2] - Revenues are anticipated to be $247.07 million, which is an increase of 8.3% from the previous year [2] Earnings Expectations - The earnings report is scheduled for January 30, 2024, and actual results will significantly influence the stock price [1] - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [2] Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for Axos Financial is lower than the consensus estimate, resulting in an Earnings ESP of -0.94% [5] - A negative Earnings ESP reading suggests a lower likelihood of an earnings beat, especially when combined with a Zacks Rank of 2 (Buy) [6][5] Historical Performance - In the last reported quarter, Axos Financial exceeded the consensus EPS estimate of $1.35 by delivering earnings of $1.41, resulting in a surprise of +4.44% [7] - The company has beaten consensus EPS estimates in the last four quarters [7] Industry Context - In comparison, American Express (AXP) is expected to post earnings of $2.65 per share for the same quarter, indicating a year-over-year change of +28% and revenues of $16.03 billion, up 13.1% [9] - American Express also has a negative Earnings ESP of -0.86%, making it difficult to predict an earnings beat despite a Zacks Rank of 2 [9]

Axos Financial, Inc. (NYSE:AX) Q1 2024 Earnings Conference Call October 26, 2023 5:00 PM ET Company Participants Johnny Lai - SVP, Corporate Development and IR Greg Garrabrants - President and CEO Derrick Walsh - EVP and CFO Conference Call Participants Andrew Liesch - Piper Sandler Tim Switzer - KBW David Chiaverini - Wedbush Gary Tenner - D.A. Davidson Operator Greetings. Welcome to Axos Financial Incorporated's First Quarter 2024 Earnings Call and Webcast. [Operator Instructions] Please note, this confer ...

Financial Performance - Axos Financial, Inc. reported net income of $82.645 million for the period ended September 30, 2023, compared to $58.407 million for the same period in 2022, representing an increase of 41.4%[121] - Adjusted earnings for the same period were $84.596 million, up from $71.615 million in 2022, reflecting a growth of 18.0%[121] - The diluted earnings per share (EPS) increased to $1.38 from $0.97, marking a rise of 42.3% year-over-year[121] - Net income for the three months ended September 30, 2023, was $82.6 million, or $1.38 per diluted share, compared to $58.4 million, or $0.97 per diluted share for the same period in 2022, representing a 41.3% increase in net income[130] Asset Growth - The company holds approximately $20.8 billion in total assets and $33.9 billion in assets under custody and/or administration[109] - Total assets increased to $20,825,206 thousand as of September 30, 2023, up from $18,407,078 thousand a year earlier, reflecting a growth of 13.1%[126] - Common stockholders' equity increased to $1.976 billion from $1.701 billion, a growth of 16.1%[122] - The total assets of the company increased by $0.5 billion, or 2.3%, to $20.8 billion as of September 30, 2023, compared to $20.3 billion at June 30, 2023[164] Income and Revenue - Net interest income for the three months ended September 30, 2023, was $211,155 thousand, an increase from $180,475 thousand in the same period of 2022, marking a growth of 16.9%[128] - Non-interest income increased to $34,507 thousand for the three months ended September 30, 2023, compared to $27,208 thousand in the same period of 2022, representing a growth of 27.1%[128] - Total interest and dividend income increased by 62.6%, primarily due to a $118.6 million increase in interest income from loans, driven by a 220 basis point increase in rates earned and a $1.9 billion increase in average balances[136] - Non-interest income increased by $7.3 million, or 27%, primarily due to higher broker-dealer fee income and banking and service fees[141] Efficiency and Ratios - Efficiency ratio improved to 49.05% for the three months ended September 30, 2023, down from 55.90% in the prior year, indicating better operational efficiency[128] - Common equity tier 1 capital to risk-weighted assets was 11.11% as of September 30, 2023, up from 9.97% a year earlier, indicating stronger capital position[126] - The efficiency ratio for the Banking Business segment improved to 45.44% in 2023 from 52.93% in 2022, indicating enhanced operational efficiency[158] Credit Quality - Provision for credit losses decreased to $7,000 thousand for the three months ended September 30, 2023, down from $8,750 thousand in the prior year, indicating improved asset quality[128] - Net annualized charge-offs to average loans decreased to 0.04% for the three months ended September 30, 2023, compared to 0.05% for the same period in 2022, reflecting enhanced credit quality[128] - Non-performing loans totaled $106.9 million, or 0.62% of total gross loans, an increase from 0.52% at June 30, 2023[170] - Total non-performing assets rose to $115.7 million, or 0.56% of total assets, compared to 0.47% at June 30, 2023[170] Capital and Liquidity - The Company and Bank met all capital adequacy requirements as of September 30, 2023, maintaining a Tier 1 capital ratio of 9.27%, exceeding the minimum requirement of 4.0%[191] - Total capital as of September 30, 2023, was $2,340.1 million, with a total risk-based capital ratio of 14.06%, above the required minimum of 10.0%[194] - The Company believes it has adequate liquidity sources to meet anticipated needs and contingencies for both the short- and long-term[183] Stock and Shareholder Activity - The company repurchased 648,208 shares of common stock at an average price of $37.85 per share during the three months ended September 30, 2023[180] - Stockholders' equity increased by $59.0 million to $1.976 billion at September 30, 2023, driven by net income of $82.6 million[180] Market and Interest Rate Risk - The company is exposed to market risk due to fluctuations in interest rates and market prices, impacting its securities business[207] - The company manages interest rate risk by setting limits on the size and duration of positions in its securities business[208]

Securities Portfolio - As of June 30, 2023, the total securities portfolio was $233.1 million, a decrease from $264.3 million in 2022, representing a decline of approximately 11.8%[49] - The available-for-sale securities portfolio comprised $232.4 million, with 67.6% in Alt-A RMBS, 18.2% in CMBS, and 10.3% in agency RMBS[50] - The weighted-average yield on available-for-sale securities was 5.21% as of June 30, 2023[50] Deposits - Total deposits reached $17.1 billion, with 92.3% in demand and savings accounts and 7.7% in time deposits[52] - The number of total deposit accounts increased to 479,279 in 2023, up from 395,699 in 2022, marking an increase of approximately 21%[60] - Interest-bearing checking and savings accounts rose to 427,299 in 2023, driven by enhanced marketing efforts[60] - Total deposits increased to $17,123,108, representing a 22.4% growth from $13,946,422 in the previous year[62] - Total interest-bearing deposits reached $14,224,958, with an average rate of 3.76%, up from $8,912,452 and 0.85% respectively[62] - Demand deposits amounted to $3,334,615, showing a growth rate of 2.43% compared to $3,611,889 in the previous year[62] - Savings deposits increased to $9,575,781, with a rate of 4.20%, compared to $4,245,555 and 0.95% in the prior year[62] - Time deposits totaled $1,314,562, with an average rate of 3.91%, up from $1,055,008 and 1.25% in the previous year[62] Capital and Regulatory Compliance - As of June 30, 2023, the Company and the Bank's capital ratios exceeded the minimums necessary to be considered "well-capitalized" under regulatory requirements[91] - The Regulatory Capital Rules require a minimum "common equity Tier 1" (CET1) ratio of 4.5%, a Tier 1 risk-based capital ratio of 6.0%, and a total risk-based capital ratio of 8.0%[88] - The Company and the Bank elected the current expected credit losses (CECL) five-year transition guidance for calculating regulatory capital ratios, which allows adding back 100% of the capital impact from the day one CECL transition adjustment[90] - The capital regulations require savings associations to maintain tangible capital of at least 1.5% of total adjusted assets[108] - The capital conservation buffer of 2.5% is required for banking institutions to avoid restrictions on capital distributions[88] - The Company is not subject to enhanced stress test regulations as it has total consolidated assets below $100 billion[108] - The Bank was in compliance with the Qualified Thrift Lender (QTL) requirement, maintaining 65% of portfolio assets in qualified thrift investments[112] - Axos Bank was in compliance with the applicable liquidity standard as of June 30, 2023[113] Operational Efficiency and Technology - The company aims to enhance its technology platforms to improve operational efficiency and customer experience[73] - The company emphasizes a comprehensive suite of treasury management products to support deposit acquisition and retention[54] - The company’s deposit operations are centralized, allowing for scalability and lower funding costs compared to traditional branch models[58] Market and Interest Rate Risk - Interest rate risk is the primary market risk, affecting net interest income, net interest margin, and the value of the securities portfolio[347] - A positive interest rate sensitivity gap indicates that interest rate sensitive assets exceed liabilities, which is favorable in a rising interest rate environment[356] - The net interest rate sensitivity gap was $4,648,597, representing 24.41% of total interest-earning assets, highlighting the company's exposure to interest rate changes[358] - The projected net interest income for the next 12 months is $1,064,324, reflecting a 9.7% change from the base[361] - The market value of equity as of June 30, 2023, was $1,843,498, with a sensitivity to interest rate changes showing a decrease of 1.4% with a 200 basis point increase[363] Employee and Competitive Landscape - The company had 1,455 full-time employees as of June 30, 2023, with no labor union representation[76] - The competitive landscape for banking and financial services is intensifying, with the company focusing on superior service and competitive rates to attract deposits[78] Securities Business Regulations - The Bank is subject to extensive laws and regulations governing its securities business, including compliance with the Dodd-Frank Act, which may increase operational costs[135] - The Bank's ability to make capital distributions, such as cash dividends, is limited by OCC regulations, which may affect its financial flexibility[116] - The Bank must disclose its privacy policy under the Gramm-Leach-Bliley Act, informing consumers of their rights regarding information sharing[124] - The Bank is required to comply with U.S. Treasury's Office of Foreign Assets Control sanctions, which could have serious legal and reputational consequences if violated[130] - The broker-dealers are subject to the SEC's customer protection rule, requiring maintenance of physical possession or control of fully-paid securities and certain cash reserves[140] - The Securities Investor Protection Corporation (SIPC) provides protection for customers up to $500,000, with a maximum of $250,000 in cash[140]

Axos Q4 Fiscal 2023 Earnings Supplement ...

Axos Financial, Inc. (NYSE:AX) Q4 2023 Earnings Conference Call July 27, 2023 5:00 PM ET Company Participants Johnny Lai – Senior Vice President, Corporate Development and Investor Relations Greg Garrabrants – President and Chief Executive Officer Derrick Walsh – Executive Vice President and Chief Financial Officer Conference Call Participants Andrew Liesch – Piper Sandler Gary Tenner – D.A. Davidson David Feaster – Raymond James Michael Perito – KBW Operator Greeting, and welcome to the Axos Financial Four ...

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]