Core Viewpoint - Axos Financial (AX) shares have increased by 9.5% in the past four weeks, closing at $65.50, with a mean price target of $84.17 indicating a potential upside of 28.5% [1] Price Targets and Analyst Estimates - The mean estimate consists of six short-term price targets with a standard deviation of $3.60, where the lowest estimate of $80 suggests a 22.1% increase, and the highest estimate of $88 indicates a 34.4% increase [2] - A low standard deviation signifies strong agreement among analysts regarding the stock's price movement, which can serve as a starting point for further research [7] Earnings Estimates and Analyst Optimism - Analysts show strong agreement in revising earnings estimates higher, which correlates with potential stock price increases [9] - Over the last 30 days, the Zacks Consensus Estimate for the current year has risen by 0.8%, with two estimates moving higher and no negative revisions [10] Zacks Rank and Investment Potential - AX holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimates [11] - While consensus price targets may not be reliable for predicting stock gains, the implied direction of price movement appears to be a useful guide [11]

Core Viewpoint - Value investing remains a preferred strategy for identifying strong stocks, focusing on companies believed to be undervalued based on fundamental analysis [2]. Company Analysis: Axos Financial (AX) - Axos Financial (AX) holds a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential for value investors [4]. - The current P/E ratio for AX is 8.53, significantly lower than the industry average of 15.59, suggesting that AX may be undervalued [4]. - Over the past year, AX's Forward P/E has fluctuated between a high of 12.11 and a low of 6.93, with a median of 8.95 [4]. - The P/B ratio for AX is 1.44, which is attractive compared to the industry average of 3.16, indicating a favorable valuation [5]. - AX's P/B ratio has ranged from a high of 2.06 to a low of 1.28 over the past 12 months, with a median of 1.57 [5]. - The P/CF ratio for AX is 10.36, which is also appealing when compared to the industry's average of 14.41, further supporting the undervaluation thesis [6]. - In the past year, AX's P/CF has varied between a high of 12.11 and a low of 6.96, with a median of 9.65 [6]. - Overall, the metrics suggest that Axos Financial is likely undervalued, and its strong earnings outlook positions it as one of the market's strongest value stocks [7].

Core Viewpoint - Axos Financial reported a revenue of $308.84 million for the quarter ended March 2025, marking a year-over-year increase of 4.8% and exceeding the Zacks Consensus Estimate by 0.72% [1] Financial Performance - Earnings per share (EPS) for the quarter was $1.81, down from $1.94 a year ago, with an EPS surprise of 4.02% compared to the consensus estimate of $1.74 [1] - The efficiency ratio was reported at 47.4%, better than the three-analyst average estimate of 47.9% [4] - Net Interest Margin remained stable at 4.8%, matching the average estimate [4] - Total non-performing assets were $188.86 million, significantly lower than the two-analyst average estimate of $244.19 million [4] - Total nonaccrual loans stood at $185.06 million, also below the two-analyst average estimate of $240.12 million [4] - Average balance of total interest-earning assets was $23.04 billion, slightly below the $23.30 billion average estimate [4] - Net annualized charge-offs to average loans were 0.1%, better than the 0.2% average estimate [4] - Net Interest Income was reported at $275.46 million, lower than the $277.97 million average estimate [4] - Total Non-Interest Income reached $33.37 million, exceeding the three-analyst average estimate of $30.07 million [4] - Income from mortgage banking and servicing rights was $1.50 million, above the two-analyst average estimate of $1.25 million [4] Stock Performance - Over the past month, shares of Axos Financial have returned -0.7%, compared to a -0.2% change in the Zacks S&P 500 composite [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Company Performance - Axos Financial reported quarterly earnings of $1.81 per share, exceeding the Zacks Consensus Estimate of $1.74 per share, but down from $1.94 per share a year ago, representing an earnings surprise of 4.02% [1] - The company posted revenues of $308.84 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 0.72% and up from $294.77 million year-over-year [2] - Over the last four quarters, Axos Financial has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Outlook - Axos Financial shares have declined approximately 8.5% since the beginning of the year, compared to a 5.5% decline in the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is $1.82 on revenues of $312.11 million, and for the current fiscal year, it is $7.24 on revenues of $1.24 billion [7] - The estimate revisions trend for Axos Financial is mixed, resulting in a Zacks Rank 3 (Hold), indicating expected performance in line with the market in the near future [6] Industry Context - The Financial - Miscellaneous Services industry, to which Axos Financial belongs, is currently in the top 35% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Financial Data and Key Metrics Changes - The company reported over $700 million in net loan growth linked quarter, with a stable net interest margin of 4.78%, down five basis points from the previous year [5][6] - Net interest income increased to $275 million, up 5.3% from $262 million in the prior year period [6] - Book value per share increased by 19% year over year, with a return on average common equity of 16% and a return on average assets of 1.8% for the quarter [5][6] Business Line Data and Key Metrics Changes - Fund finance, equipment leasing, and lender finance experienced strong originations and net loan growth, contributing to the overall loan growth of $700 million [9] - Average loan yields decreased to 7.99%, down from 8.37% in the prior quarter, with non-purchased loans yielding 7.66% and purchased loans yielding 14.32% [10][11] - Total non-accrual loans declined by $66.5 million linked quarter, improving the non-accrual loans to total loan ratio from 1.26% to 0.89% [9][17] Market Data and Key Metrics Changes - Total on-balance sheet deposits increased by 5.4% year over year to $20.1 billion, with demand money market and savings accounts representing 96% of total deposits [7][11] - Client cash sorting deposit balances were volatile, peaking at over $1.2 billion during a market sell-off before ending the quarter around $900 million [12] - Non-interest bearing deposits remained approximately $3 billion, consistent with the prior quarter [11] Company Strategy and Development Direction - The company is focused on maintaining a high net interest margin and is targeting a range of 4.25% to 4.35% for the consolidated net interest margin excluding FDIC loan purchase accretion [15] - Strategic initiatives include the development of Axos Professional Workstation to enhance client service and operational efficiency [20] - The company is leveraging artificial intelligence to improve software development and operational efficiency, aiming for better cost management and productivity [21][89] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan growth despite headwinds from high repayment levels in the jumbo single-family and multifamily mortgage business, expecting loan growth to be in the high single digits to low teens range annually [16][27] - The credit quality of the loan book remains solid, with no significant deterioration observed across lending categories [18] - Management is cautious about certain C&I segments due to potential economic changes but remains optimistic about overall loan growth [32][34] Other Important Information - The company repurchased approximately $28 million of common stock in the quarter and continued to buy back shares post-quarter [6] - Non-interest expenses were managed well, with total non-interest expense increasing by only 0.6% from the prior quarter [8][23] - The effective tax rate for the quarter was 29%, with potential changes in California tax law that could impact future tax rates [25][26] Q&A Session Summary Question: Loan growth and areas of caution - Management indicated caution in certain C&I segments but sees good opportunities for loan growth despite market volatility [31][32] Question: Fee income increase - The increase in fee income was attributed to mortgage banking impacts and additional loan fees, with no significant one-time items affecting the results [36] Question: Investment opportunities and efficiency ratio - Management aims to maintain the efficiency ratio at 48% and is focused on leveraging technology for operational improvements [43][44] Question: Net interest income outlook - Average loan growth during the quarter was lower than net loan growth, but management expects net interest income to increase in the next quarter [46] Question: Special mention substandard loans - Improvements in credit grading were driven by payoffs and sales of loans, with no significant loss content anticipated [54][55] Question: Allowance for loan losses - The increase in the allowance for loan losses was influenced by external economic factors and the CECL model, not solely by the loan portfolio performance [83][84] Question: IT and data processing spending - Increased spending on IT and data processing is aimed at leveraging AI and improving operational efficiency [87][89]

Financial Data and Key Metrics Changes - The company generated over $700 million in net loan growth linked quarter, with a stable net interest margin of 4.78%, down five basis points from the previous year [5][6][7] - Book value per share increased by 19% year over year, with a return on average common equity of 16% and a return on average assets of 1.8% for the quarter [5][6] - Net interest income was $275 million for the quarter, up 5.3% from $262 million in the prior year period [6][7] - Net income was approximately $105.2 million, compared to $104.7 million in the previous quarter, with diluted EPS of $1.81 [9] Business Line Data and Key Metrics Changes - Fund finance, equipment leasing, and lender finance showed strong originations and net loan growth, while net growth in non-purchased loans for investment was $700 million, an increase of 3.6% linked quarter [9][10] - Total non-accrual loans declined by $66.5 million linked quarter, improving the non-accrual loans to total loan ratio from 1.26% to 0.89% [9][16] - Average loan yields for the quarter were 7.99%, down from 8.37% in the prior quarter, with non-purchased loans yielding 7.66% and purchased loans yielding 14.32% [10][11] Market Data and Key Metrics Changes - Total on-balance sheet deposits increased by 5.4% year over year to $20.1 billion, with demand money market and savings accounts representing 96% of total deposits [7][11] - Client cash sorting deposit balances were volatile, peaking at over $1.2 billion during market sell-offs before ending the quarter around $900 million [12] - Non-interest bearing deposits remained approximately $3 billion, consistent with the prior quarter [11] Company Strategy and Development Direction - The company is focused on maintaining a high net interest margin and is targeting a range of 4.25% to 4.35% for the consolidated net interest margin excluding FDIC loan purchase accretion [14] - There is an emphasis on growing lower-cost deposits and cross-selling across selected lending businesses [14][15] - The company is actively investing in technology and AI to enhance operational efficiency and reduce costs, with a focus on developing proprietary platforms for client services [20][21][86] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan growth despite headwinds from high repayment levels in the jumbo single-family and multifamily mortgage business, expecting loan growth to be in the high single digits to low teens range annually [15][26] - The credit quality of the loan book remains solid, with no significant deterioration observed across lending categories [16][17] - Management is cautious about certain C&I segments due to anticipated economic changes but remains optimistic about overall loan growth [30][32] Other Important Information - The company repurchased approximately $28 million of common stock in the quarter and continued to buy back shares post-quarter [6][65] - Non-interest expenses were approximately $146 million, with a focus on managing expenses to maintain operating efficiency [22][24] - The effective tax rate for the quarter was 29%, with potential changes in California tax laws that could impact future tax liabilities [24][25] Q&A Session Summary Question: Insights on loan growth and areas of caution - Management indicated caution in certain C&I segments due to potential economic changes but sees good opportunities in other areas [30][32] Question: Clarification on fee income increase - The increase in fee income was attributed to mortgage banking impacts and additional loan fees, with no significant one-time items affecting the results [34] Question: Future efficiency and cost management - Management aims to keep the efficiency ratio stable and is focused on leveraging technology and AI to control costs [40][41] Question: Expectations for net interest income and margin - Management expects net interest income to increase in the next quarter, with some margin compression anticipated due to lower loan spreads [42][44] Question: Credit quality and allowance for loan losses - Management noted that the allowance for loan losses is influenced by external economic factors and models, not solely by current loan performance [81][82] Question: IT and data processing spending - The company is investing in IT and AI to enhance operational efficiency, with specific projects aimed at improving software development processes [86]

Financial Data and Key Metrics Changes - The company generated over $700 million in net loan growth linked quarter, with a 19% year-over-year increase in book value per share [4][8] - Net interest income was $275 million for the quarter, up 5.3% from $262 million in the prior year period [5] - Net income was approximately $105.2 million for the quarter, compared to $104.7 million in the previous quarter [8] - The return on average common equity was 16%, and the return on average assets was 1.8% for the quarter [4] Business Line Data and Key Metrics Changes - Fund finance, equipment leasing, and lender finance showed strong originations and net loan growth this quarter [8] - Net annualized charge-offs to average loans were 9 basis points, compared to 7 basis points in the corresponding period last year [6] - Total non-accrual loans declined by $66.5 million linked quarter, improving the non-accrual loans to total loan ratio from 1.26% to 0.89% [7][16] Market Data and Key Metrics Changes - Total on-balance sheet deposits increased by 5.4% year-over-year to $20.1 billion [5][10] - Average loan yields for the quarter were 7.99%, down from 8.37% in the prior quarter [9] - Ending deposit balances were $20.1 billion, up 1% linked quarter and up 5.4% year-over-year [10] Company Strategy and Development Direction - The company is focused on maintaining a high net interest margin, targeting a range of 4.25% to 4.35% [13] - There is an emphasis on growing lower-cost deposits and cross-selling across selected lending businesses [13] - The company is actively investing in technology, including AI, to enhance operational efficiency and reduce costs [20][85] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining loan growth despite headwinds from high levels of repayment in the jumbo single-family and multifamily mortgage business [9] - The company anticipates loan growth to be in the high single digits to low teens range on an annual basis [14] - Management noted that the economic environment remains uncertain, but they do not foresee significant deterioration in credit quality [15][17] Other Important Information - The company repurchased approximately $28 million of common stock in the quarter and continued to buy back shares in April [5][62] - The effective tax rate for the quarter was 29%, with potential changes in California tax laws that could impact future rates [23][24] Q&A Session Summary Question: What areas is the company being cautious in regarding loan growth? - Management indicated caution in certain C&I segments due to potential administration changes and has shied away from logistical deals [28][30] Question: Can you clarify the increase in fee income this quarter? - Management noted that the increase was due to mortgage banking impacts, auto insurance recoveries, and additional loan fees, with no significant one-time items [34] Question: How does the company plan to maintain its efficiency ratio? - Management aims to keep the efficiency ratio stable by leveraging technology and controlling personnel expenses [40][42] Question: What is the outlook for net interest income in the next quarter? - Management expects net interest income to increase as average loan growth is anticipated to rise [44] Question: Can you provide insights on the improvement in special mention substandard loans? - Management explained that improvements were driven by payoffs and sales of loans that were previously classified as substandard [51][52] Question: How does the company view its capital position and buyback strategy? - Management believes there is excess capital and sees current stock prices as a good opportunity for buybacks while maintaining strong loan growth [62][63]

Loan Portfolio - Total loans reached $20729 million in Q3 FY25, an increase of $703 million from Q2 FY25[3] - CRE Specialty loan portfolio totals $5371 million with a weighted average LTV of 42%[4] - Non-accrual loans within the CRE Specialty portfolio amounted to $35 million[4] - 73% of loans are variable rate, 20% are hybrid, and 7% are fixed rate[8] - 61% of fixed and hybrid rate loans will reprice within 3 years, and 90% within 5 years[7] Deposits - Total deposits amounted to $20136714 thousand[9] - Approximately 90% of deposits are FDIC-insured or collateralized[10] - ~$3500 million of deposits adjust with the Federal Funds rate[9] - $450 million of off-balance sheet deposits are from Axos Securities[9] Financial Performance - Net income for the quarter was $105206 thousand, with diluted EPS at $181[21] - The allowance for credit losses (ACL) for loans to total loans held for investment was 137%[21]

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents unaudited condensed consolidated financial statements, detailed notes, management's discussion, market risk, and controls [ITEM 1. FINANCIAL STATEMENTS](index=3&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Axos Financial's unaudited condensed consolidated financial statements and detailed notes for specified periods [Condensed Consolidated Balance Sheets (unaudited)](index=3&type=page&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) This section details the company's financial position, including assets, liabilities, and equity, as of March 31, 2025, and June 30, 2024 Condensed Consolidated Balance Sheets | Metric | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------- | :--------------------------- | :-------------------- | :--------- | | Total Assets | $23,981,154 | $22,855,334 | $1,125,820 | 4.9% | | Total Liabilities | $21,377,254 | $20,564,738 | $812,516 | 4.0% | | Total Stockholders' Equity | $2,603,900 | $2,290,596 | $313,304 | 13.7% | | Loans—net of allowance for credit losses | $20,193,630 | $19,231,385 | $962,245 | 5.0% | | Total Deposits | $20,136,714 | $19,359,217 | $777,497 | 4.0% | [Condensed Consolidated Statements of Income (unaudited)](index=4&type=page&id=Condensed%20Consolidated%20Statements%20of%20Income%20(unaudited)) This section outlines revenues, expenses, and net income for the three and nine months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Income (3 Months Ended Mar 31) | Metric | 3 Months Ended Mar 31, 2025 (in thousands) | 3 Months Ended Mar 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------- | :--------- | | Net Interest Income | $275,464 | $261,606 | $13,858 | 5.3% | | Provision for Credit Losses | $14,500 | $6,000 | $8,500 | 141.7% | | Non-Interest Income | $33,373 | $33,163 | $210 | 0.6% | | Non-Interest Expense | $146,261 | $133,228 | $13,033 | 9.8% | | Net Income | $105,206 | $110,720 | $(5,514) | (5.0)% | | Basic EPS | $1.84 | $1.94 | $(0.10) | (5.2)% | | Diluted EPS | $1.81 | $1.91 | $(0.10) | (5.2)% | Condensed Consolidated Statements of Income (9 Months Ended Mar 31) | Metric | 9 Months Ended Mar 31, 2025 (in thousands) | 9 Months Ended Mar 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------- | :--------- | | Net Interest Income | $847,611 | $701,367 | $146,244 | 20.9% | | Provision for Credit Losses | $40,748 | $26,500 | $14,248 | 53.8% | | Non-Interest Income | $89,781 | $191,799 | $(102,018) | (53.2)% | | Non-Interest Expense | $439,046 | $375,573 | $63,473 | 16.9% | | Net Income | $322,233 | $345,136 | $(22,903) | (6.6)% | | Basic EPS | $5.65 | $5.98 | $(0.33) | (5.5)% | | Diluted EPS | $5.55 | $5.88 | $(0.33) | (5.6)% | [Condensed Consolidated Statements of Comprehensive Income (unaudited)](index=5&type=page&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(unaudited)) This section presents total comprehensive income, including net income and other comprehensive income components Condensed Consolidated Statements of Comprehensive Income (3 Months Ended Mar 31) | Metric | 3 Months Ended Mar 31, 2025 (in thousands) | 3 Months Ended Mar 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------- | :--------- | | Net Income | $105,206 | $110,720 | $(5,514) | (5.0)% | | Other Comprehensive Income (Loss) | $(1,894) | $855 | $(2,749) | (321.5)% | | Comprehensive Income | $103,312 | $111,575 | $(8,263) | (7.4)% | Condensed Consolidated Statements of Comprehensive Income (9 Months Ended Mar 31) | Metric | 9 Months Ended Mar 31, 2025 (in thousands) | 9 Months Ended Mar 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------- | :--------- | | Net Income | $322,233 | $345,136 | $(22,903) | (6.6)% | | Other Comprehensive Income (Loss) | $3,579 | $3,546 | $33 | 0.9% | | Comprehensive Income | $325,812 | $348,682 | $(22,870) | (6.6)% | [Condensed Consolidated Statements of Stockholders' Equity (unaudited)](index=6&type=page&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity%20(unaudited)) This section details changes in stockholders' equity components for the three and nine months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Stockholders' Equity | Metric | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------- | :--------------------------- | :-------------------- | :--------- | | Total Stockholders' Equity | $2,603,900 | $2,290,596 | $313,304 | 13.7% | | Retained Earnings | $2,507,850 | $2,185,617 | $322,233 | 14.7% | | Treasury Stock | $(445,676) | $(403,489) | $(42,187) | 10.5% | | Accumulated Other Comprehensive Income (Loss) | $1,113 | $(2,466) | $3,579 | (145.1)% | [Condensed Consolidated Statements of Cash Flows (unaudited)](index=8&type=page&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) This section outlines cash flows from operating, investing, and financing activities for the nine months ended March 31, 2025, and 2024 Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | 9 Months Ended Mar 31, 2025 (in thousands) | 9 Months Ended Mar 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------- | :--------- | | Net Cash Provided by Operating Activities | $306,979 | $268,506 | $38,473 | 14.3% | | Net Cash Used in Investing Activities | $(992,292) | $(2,162,131) | $1,169,839 | (54.1)% | | Net Cash Provided by Financing Activities | $757,231 | $1,857,450 | $(1,100,219) | (59.2)% | | Net Change in Cash, Cash Equivalents and Restricted Cash | $71,918 | $(36,175) | $108,093 | (298.8)% | [Notes to Condensed Consolidated Financial Statements (unaudited)](index=10&type=page&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(unaudited)) This section provides detailed explanations and disclosures for financial statements, covering policies, fair value, loans, and equity [1. Summary of Significant Accounting Policies](index=10&type=page&id=1.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the basis of presentation, consolidation, loan portfolio acquisition, and key accounting policies - On December 7, 2023, Axos acquired two loan portfolios from the FDIC with an aggregate unpaid principal balance of **$1.3 billion** at a **37% discount**[23](index=23&type=chunk) - Comprehensive income includes net income and other comprehensive income (OCI), such as unrealized gains and losses on available-for-sale securities and gains and losses on derivatives in designated cash flow hedge accounting relationships[27](index=27&type=chunk) - The Company uses derivatives for hedging mortgage loan commitments, market making in interest rate swaps and caps, and managing interest rate risk from floating-rate deposits[28](index=28&type=chunk)[29](index=29&type=chunk)[31](index=31&type=chunk) - The Company adopted ASU 2023-02 (tax equity investments) with no significant impact and does not expect significant impact from ASU 2023-07 (segment expenses) and ASU 2023-09 (income tax disclosures) upon their future adoption[34](index=34&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[38](index=38&type=chunk) [2. Fair Value](index=12&type=page&id=2.%20Fair%20Value) This section presents recurring fair value measurements of financial assets and liabilities, categorized by input levels Fair Value Measurements | Metric | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------- | :--------------------------- | :-------------------- | :--------- | | Total Available-for-Sale Securities | $79,958 | $141,611 | $(61,653) | (43.5)% | | Servicing Rights | $27,585 | $28,924 | $(1,339) | (4.6)% | | Other Assets—Derivative Instruments | $16,155 | $106,796 | $(90,641) | (84.9)% | - Key unobservable inputs for Level 3 Non-Agency MBS include Projected Constant Prepayment Rate (**0.0-30.0%**), Projected Constant Default Rate (**0.0-3.0%**), Projected Loss Severity (**0.0-68.9%**), and Discount Rate over SOFR Swaps (**2.5-4.9%**)[41](index=41&type=chunk) - Key unobservable inputs for Level 3 Servicing Rights include Projected Constant Prepayment Rate (**3.5-26.2%**), Life (**2.3-11.6 years**), and Discount Rate (**9.5-11.2%**)[41](index=41&type=chunk) [3. Available-for-Sale Securities](index=16&type=page&id=3.%20Available-for-Sale%20Securities) This section details amortized cost and fair value of available-for-sale securities, including unrealized gains/losses and maturity Total Available-for-Sale Securities | Metric | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------- | :--------------------------- | :-------------------- | :--------- | | Total Available-for-Sale Securities | $79,958 | $141,611 | $(61,653) | (43.5)% | - Unrealized losses on available-for-sale securities are primarily driven by the increase in interest rates, with **no credit losses recognized**[49](index=49&type=chunk) - Available-for-sale securities pledged to secure borrowings were **$0.7 million** as of March 31, 2025[50](index=50&type=chunk) Maturity Distribution of Available-for-Sale Securities (Amortized Cost) as of March 31, 2025 | Maturity Period | Amount (in thousands) | | :-------------- | :-------------------- | | Due Within One Year | $35,970 | | Due after One but within Five Years | $31,609 | | Due after Five but within Ten Years | $6,826 | | Due After Ten Years | $6,642 | [4. Loans & Allowance for Credit Losses](index=19&type=page&id=4.%20Loans%20%26%20Allowance%20for%20Credit%20Losses) This section breaks down the loan portfolio by segment, details allowance for credit losses, and credit quality indicators Loan Portfolio Segment | Loan Portfolio Segment | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------- | :--------------------------- | :-------------------- | :--------- | | Single Family - Mortgage & Warehouse | $4,194,821 | $4,178,832 | $15,989 | 0.4% | | Multifamily and Commercial Mortgage | $3,340,618 | $3,861,931 | $(521,313) | (13.5)% | | Commercial Real Estate | $6,356,559 | $6,088,622 | $267,937 | 4.4% | | Commercial & Industrial - Non-RE | $6,389,964 | $5,241,766 | $1,148,198 | 21.9% | | Auto & Consumer | $447,294 | $431,660 | $15,634 | 3.6% | | **Total Gross Loans** | **$20,729,256** | **$19,802,811** | **$926,445** | **4.7%** | | Allowance for Credit Losses - Loans | $279,950 | $260,542 | $19,408 | 7.5% | | Nonaccrual Loans | $185,060 | $113,359 | $71,701 | 63.2% | - The provision for credit losses was **$14.5 million** for the three months and **$40.7 million** for the nine months ended March 31, 2025, primarily driven by loan growth in the commercial & industrial - non-RE portfolio and macroeconomic variables[54](index=54&type=chunk)[146](index=146&type=chunk) - Nonaccrual loans to total loans increased to **0.89%** at March 31, 2025, from **0.57%** at June 30, 2024[59](index=59&type=chunk)[168](index=168&type=chunk) [5. Derivatives](index=24&type=page&id=5.%20Derivatives) This section provides notional amounts and fair values of derivative instruments, including hedging and non-hedging types Derivative Instruments | Metric | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------- | :--------------------------- | :-------------------- | :--------- | | Total Notional Amount of Derivatives | $2,998,209 | $2,435,874 | $562,335 | 23.1% | | Derivative Assets (Fair Value) | $16,155 | $106,796 | $(90,641) | (84.9)% | | Derivative Liabilities (Fair Value) | $72,642 | $102,949 | $(30,307) | (29.4)% | - Approximately **$2.7 million** of pre-tax net gain related to cash flow hedges recorded in AOCI is expected to be recognized in income over the next 12 months[75](index=75&type=chunk) [6. Offsetting of Derivatives and Securities Financing Agreements](index=25&type=page&id=6.%20Offsetting%20of%20Derivatives%20and%20Securities%20Financing%20Agreements) This section presents information on offsetting derivative instruments and securities financing agreements, including collateral Offsetting of Derivatives and Securities Financing Agreements | Metric | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------- | :--------------------------- | :-------------------- | :--------- | | Securities Borrowed (Gross Assets) | $91,915 | $67,212 | $24,703 | 36.7% | | Securities Loaned (Gross Liabilities) | $111,094 | $74,177 | $36,917 | 49.8% | | Other Assets - Derivative Assets (Net of Variation Margin) | $16,155 | $106,796 | $(90,641) | (84.9)% | - Derivative assets are presented net of **$63.2 million** of variation margin on centrally-cleared derivatives as of March 31, 2025[78](index=78&type=chunk) [7. Stockholders' Equity and Stock-Based Compensation](index=26&type=page&id=7.%20Stockholders%27%20Equity%20and%20Stock-Based%20Compensation) This section discusses the equity incentive plan, RSU changes, common stock repurchases, and accumulated other comprehensive income - Total compensation cost not yet recognized related to non-vested awards was **$74.8 million**, expected to be recognized over a weighted-average period of **1.4 years**[81](index=81&type=chunk) Common Stock Repurchases | Period | Total Repurchase (in thousands) | Number of Shares Repurchased | Average Price Paid Per Share | | :--------------------------------- | :------------------------------ | :--------------------------- | :--------------------------- | | 3 Months Ended Mar 31, 2025 | $27,870 | 434,327 | $64.17 | | 9 Months Ended Mar 31, 2025 | $27,870 | 434,327 | $64.17 | | 9 Months Ended Mar 31, 2024 | $83,781 | 2,267,610 | $36.95 | - As of March 31, 2025, there was **$78.7 million** of share repurchase authorization remaining[82](index=82&type=chunk) - The company entered into an equity distribution agreement on January 28, 2025, to issue and sell up to **$150 million** of common stock in at-the-market offerings, with **no shares issued yet**[83](index=83&type=chunk) - Accumulated other comprehensive income (loss) shifted from a loss of **$(2.466) million** at June 30, 2024, to a gain of **$1.113 million** at March 31, 2025, reflecting changes in unrealized gains/losses on available-for-sale securities and cash flow hedges[85](index=85&type=chunk) [8. Earnings per Common Share](index=28&type=page&id=8.%20Earnings%20per%20Common%20Share) This section presents basic and diluted earnings per common share calculations for the three and nine months ended March 31, 2025, and 2024 Earnings per Common Share (3 Months Ended Mar 31) | Metric | 3 Months Ended Mar 31, 2025 | 3 Months Ended Mar 31, 2024 | Change | | :--------------------------------- | :-------------------------- | :-------------------------- | :----- | | Basic EPS | $1.84 | $1.94 | $(0.10) | | Diluted EPS | $1.81 | $1.91 | $(0.10) | Earnings per Common Share (9 Months Ended Mar 31) | Metric | 9 Months Ended Mar 31, 2025 | 9 Months Ended Mar 31, 2024 | Change | | :--------------------------------- | :-------------------------- | :-------------------------- | :----- | | Basic EPS | $5.65 | $5.98 | $(0.33) | | Diluted EPS | $5.55 | $5.88 | $(0.33) | [9. Commitments and Contingencies](index=28&type=page&id=9.%20Commitments%20and%20Contingencies) This section discloses off-balance-sheet commitments and details legal proceedings, including derivative actions and class actions Off-Balance Sheet Commitments as of March 31, 2025 | Commitment Type | Amount (in thousands) | | :-------------- | :-------------------- | | Commitments to fund loans | $5,191,149 | | Commitments to sell loans | $5,298 | | Standby letters of credit | $1,988 | | Commitments to contribute capital | $3,514 | - The company has **$29.0 million** of commitments to contribute capital to LIHTC investments included in 'Accounts payable and other liabilities'[92](index=92&type=chunk) - A consolidated derivative action is pending, stayed until resolution of an appeal in a related employment action, where the appellate court affirmed the jury's verdict on February 6, 2025[94](index=94&type=chunk) - The company paid all amounts owed under the MUFG Union Bank, N.A. judgment on March 21, 2025, at an amount **less than previously accrued**[95](index=95&type=chunk) - Three putative class action lawsuits (UFB Actions) are pending, alleging false or misleading rate representations; arbitration was compelled in each, but one arbitration proceeding dismissed claims, remanding the case to the District Court; the Company intends to vigorously defend[96](index=96&type=chunk) [10. Segment Reporting and Revenue Information](index=29&type=page&id=10.%20Segment%20Reporting%20and%20Revenue%20Information) This section provides financial information for the Banking and Securities Business Segments, including non-interest income details Banking Business Segment (3 Months Ended March 31, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------------------ | :------------------ | :------------------ | :-------------------- | :--------- | | Net interest income | $272,260 | $258,435 | $13,825 | 5.3% | | Non-interest income | $12,666 | $11,908 | $758 | 6.4% | | Non-interest expense | $118,325 | $104,959 | $13,366 | 12.7% | | Income before taxes | $152,101 | $159,384 | $(7,283) | (4.6)% | Securities Business Segment (3 Months Ended March 31, 2025 vs. 2024) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------------------ | :------------------ | :------------------ | :-------------------- | :--------- | | Net interest income | $6,942 | $7,133 | $(191) | (2.7)% | | Non-interest income | $30,611 | $32,746 | $(2,135) | (6.5)% | | Non-interest expense | $28,416 | $32,488 | $(4,072) | (12.5)% | | Income before taxes | $9,137 | $7,391 | $1,746 | 23.6% | - Total non-interest income for the nine months ended March 31, 2025, decreased by **$102.0 million (53.2%)** to **$89.8 million**, primarily due to the absence of the gain on the FDIC Loan Purchase in the prior year period[102](index=102&type=chunk)[148](index=148&type=chunk) [11. Borrowings, Subordinated Notes and Debentures](index=31&type=page&id=11.%20Borrowings,%20Subordinated%20Notes%20and%20Debentures) This section details subordinated notes, including repurchases and non-cash gains on extinguishment for the nine months ended March 31, 2025 - On July 15, 2024, the Company repurchased **$3.0 million** par value of its 4.00% Fixed-to-Floating Rate Subordinated Notes due March 1, 2032, for **$2.6 million**, resulting in a **$0.4 million** pre-tax non-cash gain[103](index=103&type=chunk) - On September 27, 2024, the Company repurchased **$9.5 million** par value of its 4.875% Fixed-to-Floating Rate Subordinated Notes due October 1, 2030, for **$9.2 million**, resulting in a **$0.2 million** pre-tax non-cash gain[103](index=103&type=chunk) - These non-cash gains are recorded in 'General and administrative expense' in the condensed Consolidated Statements of Income[103](index=103&type=chunk) [12. Other Assets](index=31&type=page&id=12.%20Other%20Assets) This section describes the composition and financial impact of 'Other Assets,' including BOLI and LIHTC investments - The Company purchased **$100 million** of BOLI policies on the lives of certain executives during the nine months ended March 31, 2025[104](index=104&type=chunk) LIHTC Investments Financial Impact (9 Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :------------------ | :------------------ | :-------------------- | :--------- | | Net benefit (expense) included in income tax expense | $835 | $926 | $(91) | (9.8)% | LIHTC Investments on Balance Sheet | Metric | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------- | :--------------------------- | :-------------------- | :--------- | | LIHTC investments | $61,472 | $65,873 | $(4,401) | (6.7)% | | LIHTC unfunded commitments | $28,980 | $40,617 | $(11,637) | (28.6)% | [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=33&type=section&id=ITEM%202.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on financial performance, condition, liquidity, and capital resources, including non-GAAP measures - Axos Financial, Inc. is a technology-driven, diversified financial services company with approximately **$24.0 billion in assets** and **$37.1 billion of assets under custody and/or administration**[112](index=112&type=chunk) - The company operates through two segments: the Banking Business Segment (consumer and commercial banking) and the Securities Business Segment (clearing, custody, and investment advisory services)[112](index=112&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk) - Axos Financial, Inc. and its subsidiaries are supervised and regulated by the Federal Reserve, OCC, FDIC, SEC, and FINRA[113](index=113&type=chunk)[114](index=114&type=chunk)[116](index=116&type=chunk) - On December 7, 2023, the Company acquired two loan portfolios from the FDIC with an aggregate unpaid principal balance of **$1.3 billion** at a **37% discount**, expected to yield higher returns[117](index=117&type=chunk) [USE OF NON-GAAP MEASURES](index=35&type=page&id=USE%20OF%20NON-GAAP%20MEASURES) This section explains non-GAAP financial measures, including adjusted earnings, EPS, and tangible book value, with reconciliations - Adjusted earnings (Non-GAAP) is defined as net income without the after-tax impact of non-recurring acquisition-related items and other unusual costs[124](index=124&type=chunk) - Adjusted EPS (Non-GAAP) is calculated by dividing non-GAAP adjusted earnings by the average number of diluted common shares outstanding[124](index=124&type=chunk) - Tangible book value (Non-GAAP) is defined as book value adjusted for goodwill and other intangible assets, and tangible book value per common share is calculated by dividing tangible book value by common shares outstanding[125](index=125&type=chunk) Adjusted Earnings and EPS (Non-GAAP) Reconciliation | Metric | 3 Months Ended Mar 31, 2025 (in thousands) | 3 Months Ended Mar 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------- | :--------- | | Net Income (GAAP) | $105,206 | $110,720 | $(5,514) | (5.0)% | | Adjusted Earnings (Non-GAAP) | $105,011 | $112,655 | $(7,644) | (6.8)% | | Diluted EPS (GAAP) | $1.81 | $1.91 | $(0.10) | (5.2)% | | Adjusted EPS (Non-GAAP) | $1.81 | $1.94 | $(0.13) | (6.7)% | | Metric | 9 Months Ended Mar 31, 2025 (in thousands) | 9 Months Ended Mar 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :--------------------------------- | :--------------------------------- | :-------------------- | :--------- | | Net Income (GAAP) | $322,233 | $345,136 | $(22,903) | (6.6)% | | Adjusted Earnings (Non-GAAP) | $324,997 | $289,292 | $35,705 | 12.3% | | Diluted EPS (GAAP) | $5.55 | $5.88 | $(0.33) | (5.6)% | | Adjusted EPS (Non-GAAP) | $5.60 | $4.93 | $0.67 | 13.6% | [SELECTED FINANCIAL INFORMATION](index=37&type=page&id=SELECTED%20FINANCIAL%20INFORMATION) This section provides a comprehensive overview of key financial data, including balance sheet items, capital, and performance ratios Selected Balance Sheet Data | Metric | March 31, 2025 (in thousands) | June 30, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :---------------------------- | :--------------------------- | :-------------------- | :--------- | | Total assets | $23,981,154 | $22,855,334 | $1,125,820 | 4.9% | | Total deposits | $20,136,714 | $19,359,217 | $777,497 | 4.0% | | Book value per common share | $45.79 | $40.26 | $5.53 | 13.7% | | Tangible book value per common share (Non-GAAP) | $42.91 | $37.26 | $5.65 | 15.2% | Capital Ratios (Axos Financial, Inc. as of March 31, 2025) | Ratio | Value | | :--------------------------------- | :---- | | Tier 1 leverage | 10.45% | | Common equity tier 1 capital | 12.39% | | Tier 1 capital | 12.39% | | Total capital | 15.21% | Performance Ratios | Metric | 3 Months Ended Mar 31, 2025 | 3 Months Ended Mar 31, 2024 | Change (bps) | | :--------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Net interest margin | 4.78% | 4.87% | (9) | | Efficiency ratio | 47.36% | 45.20% | 216 | | Nonaccrual loans to total loans | 0.89% | 0.63% | 26 | | Metric | 9 Months Ended Mar 31, 2025 | 9 Months Ended Mar 31, 2024 | Change (bps) | | :--------------------------------- | :-------------------------- | :-------------------------- | :----------- | | Net interest margin | 4.93% | 4.61% | 32 | | Efficiency ratio | 46.84% | 42.05% | 479 | | Nonaccrual loans to total loans | 0.89% | 0.63% | 26 | [RESULTS OF OPERATIONS](index=39&type=page&id=RESULTS%20OF%20OPERATIONS) This section compares financial results for the three and nine months ended March 31, 2025, and 2024, focusing on income and expenses - Net income decreased by **5.0%** for the three months and **6.6%** for the nine months ended March 31, 2025, compared to the prior year periods[130](index=130&type=chunk) - Net interest income increased by **5.3%** for the three months and **20.9%** for the nine months ended March 31, 2025[140](index=140&type=chunk)[143](index=143&type=chunk) - Net interest margin decreased by **9 basis points** to **4.78%** for the three months ended March 31, 2025, but increased by **32 basis points** to **4.93%** for the nine months ended March 31, 2025[140](index=140&type=chunk)[143](index=143&type=chunk) - Provision for credit losses increased to **$14.5 million** for the three months and **$40.7 million** for the nine months ended March 31, 2025, primarily due to loan growth in the commercial & industrial - non-RE portfolio and macroeconomic factors[146](index=146&type=chunk) - Non-interest income increased by **0.6%** for the three months but decreased by **53.2%** for the nine months ended March 31, 2025, mainly due to the absence of the FDIC Loan Purchase gain in the prior year[148](index=148&type=chunk) - Non-interest expense increased by **9.8%** for the three months and **16.9%** for the nine months ended March 31, 2025, driven by higher salaries, data processing, and FDIC fees[149](index=149&type=chunk)[151](index=151&type=chunk) [SEGMENT RESULTS](index=44&type=page&id=SEGMENT%20RESULTS) This section presents operating results for the Banking and Securities Business Segments, highlighting key performance indicators Banking Business Segment Performance (3 Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------------------ | :------------------ | :------------------ | :-------------------- | :--------- | | Income before taxes | $152,101 | $159,384 | $(7,283) | (4.6)% | | Net interest income | $272,260 | $258,435 | $13,825 | 5.3% | | Non-interest income | $12,666 | $11,908 | $758 | 6.4% | | Non-interest expense | $118,325 | $104,959 | $13,366 | 12.7% | Securities Business Segment Performance (3 Months Ended March 31) | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (in thousands) | % Change | | :------------------ | :------------------ | :------------------ | :-------------------- | :--------- | | Income before taxes | $9,137 | $7,391 | $1,746 | 23.6% | | Net interest income | $6,942 | $7,133 | $(191) | (2.7)% | | Non-interest income | $30,611 | $32,746 | $(2,135) | (6.5)% | | Non-interest expense | $28,416 | $32,488 | $(4,072) | (12.5)% | [FINANCIAL CONDITION](index=46&type=page&id=FINANCIAL%20CONDITION) This section analyzes the balance sheet, focusing on changes in assets, liabilities, loans, and asset quality - Total assets increased by **$1.1 billion (4.9%)** to **$24.0 billion** at March 31, 2025, and total liabilities increased by **$0.8 billion (4.0%)** to **$21.4 billion**[165](index=165&type=chunk) - Total gross loans increased by **$926.4 million (4.7%)** to **$20.7 billion** at March 31, 2025[166](index=166&type=chunk) - Non-performing assets increased to **$188.9 million** at March 31, 2025, from **$115.8 million** at June 30, 2024, primarily due to a **$71.7 million** increase in nonaccrual loans, mainly in the commercial & industrial - non-RE portfolio[168](index=168&type=chunk) - Non-performing assets as a percentage of total assets increased to **0.79%** at March 31, 2025, from **0.51%** at June 30, 2024[168](index=168&type=chunk) - Total available-for-sale securities decreased to **$80.0 million** at March 31, 2025, from **$141.6 million** at June 30, 2024[169](index=169&type=chunk) - Total deposits increased by **$0.8 billion (4.0%)** to **$20.1 billion** at March 31, 2025[170](index=170&type=chunk) - Total borrowings increased to **$437.4 million** at March 31, 2025, from **$415.7 million** at June 30, 2024[172](index=172&type=chunk) [LIQUIDITY](index=49&type=page&id=LIQUIDITY) This section discusses cash flow activities and available liquidity sources, including borrowing capacities and deposit insurance - Net cash provided by operating activities was **$307.0 million** for the nine months ended March 31, 2025, an increase from **$268.5 million** in the prior year[174](index=174&type=chunk) - Net cash used in investing activities decreased significantly to **$992.3 million** for the nine months ended March 31, 2025, from **$2,162.1 million** in the prior year, primarily due to the absence of the FDIC Loan Purchase[175](index=175&type=chunk) - Net cash provided by financing activities decreased to **$757.2 million** for the nine months ended March 31, 2025, from **$1,857.5 million** in the prior year, mainly due to a lower net increase in deposits[176](index=176&type=chunk) - As of March 31, 2025, the Bank had **$2,813.5 million** immediately available from the FHLB and **$7,554.3 million** available from the FRBSF Discount Window[177](index=177&type=chunk)[178](index=178&type=chunk) - Axos Clearing has a **$150 million** third-party secured line of credit (with **$63.5 million** outstanding) and a **$110 million** third-party unsecured line of credit (no outstanding amount)[179](index=179&type=chunk)[180](index=180&type=chunk) - Management views liquidity sources as stable and adequate, with approximately **90%** of total Bank deposits in insured or collateralized accounts[181](index=181&type=chunk) [CAPITAL RESOURCES AND REQUIREMENTS](index=50&type=page&id=CAPITAL%20RESOURCES%20AND%20REQUIREMENTS) This section details regulatory capital adequacy requirements and presents capital ratios for Axos Financial, Inc. and Axos Bank - Both Axos Financial, Inc. and Axos Bank met all capital adequacy requirements and were **"well capitalized"** under the regulatory framework for prompt corrective action as of March 31, 2025[185](index=185&type=chunk) - The Company and Bank elected the five-year CECL transition guidance for calculating regulatory capital, which is being phased out[186](index=186&type=chunk) - Both the Company and Bank were in compliance with the capital conservation buffer requirement at March 31, 2025[188](index=188&type=chunk) Regulatory Capital Ratios (Axos Financial, Inc.) | Ratio | March 31, 2025 | June 30, 2024 | "Well Capitalized" Ratio | Minimum Capital Ratio | | :----------------------------------------------- | :------------- | :------------ | :----------------------- | :-------------------- | | Tier 1 leverage | 10.45% | 9.43% | 5.00% | 4.00% | | Common equity tier 1 capital | 12.39% | 12.01% | 6.50% | 4.50% | | Tier 1 capital | 12.39% | 12.01% | 8.00% | 6.00% | | Total capital | 15.21% | 14.84% | 10.00% | 8.00% | Regulatory Capital Ratios (Axos Bank) | Ratio | March 31, 2025 | June 30, 2024 | "Well Capitalized" Ratio | Minimum Capital Ratio | | :------------------------------------ | :------------- | :------------ | :----------------------- | :-------------------- | | Tier 1 leverage | 10.14% | 9.74% | 5.00% | 4.00% | | Common equity tier 1 capital | 12.31% | 12.74% | 6.50% | 4.50% | | Tier 1 capital | 12.31% | 12.74% | 8.00% | 6.00% | | Total capital | 13.49% | 13.81% | 10.00% | 8.00% | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=51&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section discusses market risk exposure, primarily interest rate risk, and its measurement and management across segments - The company measures interest rate sensitivity as the difference between interest-earning assets and interest-bearing liabilities that mature or re-price within a given period, known as the interest rate sensitivity gap[192](index=192&type=chunk) Net Interest Income Sensitivity (Banking Business Segment, as of March 31, 2025) | Interest Rate Shock | First 12 Months (% Change from Base) | Next 12 Months (% Change from Base) | | :------------------ | :----------------------------------- | :---------------------------------- | | Up 200 basis points | 6.5% | 13.4% | | Up 100 basis points | 3.2% | 6.7% | | Down 100 basis points | (2.1)% | (4.8)% | | Down 200 basis points | (2.3)% | (7.2)% | Market Value of Equity (MVE) Sensitivity (as of March 31, 2025) | Interest Rate Shock | Percentage Change from Base | | :------------------ | :-------------------------- | | Up 200 basis points | 1.0% | | Up 100 basis points | 1.1% | | Down 100 basis points | (2.2)% | | Down 200 basis points | (4.4)% | - The Securities Business Segment is primarily exposed to interest rate risk from customer and correspondent margin loans and securities borrowing activities, with rates generally fluctuating in parallel to funding sources[199](index=199&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=54&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of disclosure controls and procedures and reports no material changes to internal controls - The Company's disclosure controls and procedures were evaluated and deemed **effective** as of March 31, 2025, by the Chief Executive Officer and Chief Financial Officer[204](index=204&type=chunk) - There were no changes in the Company's internal control over financial reporting during the quarter ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting[204](index=204&type=chunk) - Management acknowledges that control systems provide only reasonable, not absolute, assurance and are subject to inherent limitations, resource constraints, and potential deterioration[205](index=205&type=chunk) [PART II – OTHER INFORMATION](index=55&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part contains disclosures on legal proceedings, risk factors, equity sales, defaults, other information, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=55&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section refers to Note 9 for legal proceedings and confirms no material adverse effect from ordinary course claims - Information on legal proceedings is incorporated by reference from Note 9—"Commitments and Contingencies" in the accompanying interim condensed consolidated financial statements[208](index=208&type=chunk) - Other claims or litigation arising in the ordinary course of business are not expected to have a material adverse effect on the Company's financial condition, results of operations, or business[209](index=209&type=chunk) [ITEM 1A. RISK FACTORS](index=55&type=page&id=ITEM%201A.%20RISK%20FACTORS) This section directs readers to the 2024 Form 10-K for comprehensive risk factors and acknowledges other unanticipated factors - Readers are encouraged to review the detailed risk factors under Item 1A—"Risk Factors" in the **2024 Form 10-K**[210](index=210&type=chunk) - The company acknowledges that other factors may exist that cannot be anticipated or are not currently considered significant, which could cause actual results to differ materially[210](index=210&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES](index=55&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES,%20USE%20OF%20PROCEEDS,%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) This section details common stock repurchases and shares retained from RSU net settlements for the three months ended March 31, 2025 Common Stock Repurchases (3 Months Ended March 31, 2025) | Period | Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet be Purchased (in thousands) | | :--------------------------------- | :------------------------- | :--------------------------- | :------------------------------------------------------------------------ | | January 1, 2025 to January 31, 2025 | 29,034 | $68.91 | $104,520 | | February 1, 2025 to February 28, 2025 | 38,660 | $66.60 | $101,945 | | March 1, 2025 to March 31, 2025 | 366,633 | $63.54 | $78,650 | | **For the Three Months Ended March 31, 2025** | **434,327** | **$64.17** | **$78,650** | - The company retained **98,033 shares** in net settlement of restricted stock unit awards for the three months ended March 31, 2025[212](index=212&type=chunk) - The share repurchase program will continue in effect until terminated by the Board of Directors, with **$78.7 million** of authorization remaining as of March 31, 2025[82](index=82&type=chunk)[212](index=212&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=55&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms no defaults occurred upon senior securities - There were **no defaults** upon senior securities[213](index=213&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=55&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states that mine safety disclosures are not applicable to the company - This item is **not applicable**[214](index=214&type=chunk) [ITEM 5. OTHER INFORMATION](index=55&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section discloses no director or officer adopted or terminated Rule 10b5-1 trading arrangements - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement" during the three months ended March 31, 2025[215](index=215&type=chunk) [ITEM 6. EXHIBITS](index=56&type=section&id=ITEM%206.%20EXHIBITS) This section lists exhibits filed with Form 10-Q, including certifications, agreements, and XBRL documents - The exhibits include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[217](index=217&type=chunk) - The Equity Distribution Agreement, dated January 28, 2025, is filed as Exhibit 10.1[217](index=217&type=chunk) - Inline XBRL Instance Document and Taxonomy Extension Schema, Calculation, Label, Presentation, and Definition Documents are filed[217](index=217&type=chunk) [SIGNATURES](index=57&type=section&id=SIGNATURES) This section contains the signatures of authorized officers, certifying the report - The report was signed on April 30, 2025, by Gregory Garrabrants, President and Chief Executive Officer, and Derrick K. Walsh, Executive Vice President and Chief Financial Officer[221](index=221&type=chunk)

Loan Growth and Deposits - Axos reported a loan growth of $3.6 billion in Q3 Fiscal 2025, representing a 16% increase year-over-year[2]. - Total deposits amount to $20.4 billion, with 90% being FDIC-insured or collateralized[12]. - Approximately $3.5 billion of deposits adjust with the Federal Funds rate, enhancing deposit rate optionality[11]. - As of March 31, 2025, the total loans outstanding amounted to $2,729 million, with non-accrual loans at $185 million[19]. - The commercial mortgage loans outstanding were $3,341 million, with a non-accrual amount of $44 million[19]. Credit Quality and Allowance for Credit Losses - The allowance for credit losses (ACL) and unfunded loan commitments reserve (UCL) stands at $6.2 million[15]. - The total ACL as of March 31, 2025, was $207 million, reflecting a 14% increase compared to the previous year[17]. - The allowance for credit losses (ACL) by loan category showed a year-over-year increase of 4.19%[17]. - The overall credit quality remains strong, with a total non-accrual loans percentage of 0.63% as of March 31, 2025[19]. - The company reported a significant improvement in credit quality metrics compared to December 31, 2024, where the single-family mortgage non-accrual rate was 1.69%[19]. Financial Performance - The company reported a net income of $15.9 million for the quarter, representing a 42.87% increase compared to the previous period[23]. - Total revenue for the quarter reached $45.64 million, reflecting a 46.85% growth year-over-year[23]. - The company achieved a gross margin of 47.36%, up from 45.20% in the previous quarter, indicating improved operational efficiency[23]. - The average return on equity (ROE) was reported at 18.81%, demonstrating effective management of shareholder equity[23]. - The adjusted earnings for the period, excluding non-recurring costs, were $11.2 million, compared to $10.6 million in the previous period, indicating a 5.66% increase[28]. Capital and Equity - Total stockholders' equity rose to $2,603,900,000, up from $2,505,720,000, indicating an increase of about 3.9%[21]. - The company reported a common equity tier 1 capital ratio of 12.39%, up from 12.01%[21]. - The total capital ratio to risk-weighted assets was reported at 15.49%, compared to 14.84% previously[21]. - Tangible book value per common share was reported at $10.50, up from $10.48, representing a 0.19% increase[30]. - The company’s total stockholders' equity (non-GAAP) was $42.91, compared to $41.27 previously, indicating a growth trend[31]. Operational Efficiency and Future Outlook - The company plans to expand its market presence with new product launches expected in Q2 2024, targeting a 30% increase in market share[23]. - Research and development expenses increased to $6.00 million, highlighting the company's commitment to innovation and new technology[23]. - The company is exploring potential acquisitions to enhance its product portfolio and market reach, with a focus on strategic partnerships[23]. - The efficiency ratio improved to 0.09%, down from 0.10% in the prior period, reflecting a decrease of 1%[1]. - The company plans to expand its market presence through strategic acquisitions and new product launches in the upcoming quarters[1].