FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K may contain various forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements include projections, statements of the plans, goals and objectives of management for future operations, statements of future economic performance, assumptions underlying these statements, and other statements that are not statements of historical facts. Words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “potential,” “believes,” “seeks,” “estimates,” “should,” “may,” “will” and variations of these words or similar expressions are intended to identify forward-looking statements. Forward-looking statements also include the assumptions underlying or relating to any of the foregoing statements.

References in this report to the “Company,” “us,” “we,” “our,” “Axos Financial,” or “Axos” are all to Axos Financial, Inc. on a consolidated basis. References in this report to “Axos Bank,” the “Bank,” or “our bank” are to Axos Bank, one of our consolidated subsidiaries.

Forward-looking statements are subject to significant business, economic and competitive risks, uncertainties and contingencies, many of which are difficult to predict and beyond the control of Axos or the Bank, which could cause our actual results to differ materially from the results expressed or implied in such forward-looking statements. These and other risks, uncertainties and contingencies are described in this Annual Report on Form 10-K, including under “Item 1A. Risk Factors”, and the Company’s other reports filed with the Securities and Exchange Commission (the “SEC”) from time to ~~time, including but are~~time.

RISK FACTOR SUMMARY

Investing in our securities involves a high degree of risk. The following is a summary of certain material risks and uncertainties facing our business. This summary is not ~~limited~~a complete discussion of the risks and uncertainties affecting us. A more complete discussion of these and other risks and uncertainties is set forth under “Item 1A. Risk Factors” of this Annual Report on Form 10-K. Additional risks not presently known to ~~the following:~~us or that we presently deem immaterial may also affect us. If any of these risks occur, our business, financial condition or results of operations could be materially and adversely affected.

◦Changes in interest rates;

◦General economic and market conditions, including the risk of a significant and/or prolonged period of inflation or economic downturn;

◦The soundness of other financial institutions;

◦Replacement of the LIBOR benchmark interest rate;

◦Uncertainties surrounding the severity, duration, and effects of the novel coronavirus (“COVID-19”) pandemic;

◦Changes in regulation or regulatory oversight, accounting rules, and laws, including tax laws;

◦Policies and regulations enacted by the Consumer Financial Protection Bureau;

~~Changes in United States trade policies;~~

~~Replacement of the LIBOR benchmark interest rate;~~

◦Changes in real estate values;

◦Possible defaults on our ~~mortgage~~multifamily residential loans;

◦Mortgage buying activity of Fannie Mae and Freddie Mac;

◦Financial and credit risks associated with commercial and industrial and commercial real estate loans;

◦Seasonal fluctuations in mortgage origination;

◦The adequacy of our allowance for ~~loan and lease~~credit losses;

◦Changes in the value of goodwill and other intangible assets;

◦Our risk management processes and procedures effectiveness;

◦Higher FDIC assessments could negatively impact profitability;

◦Our ~~acquisition of a~~ broker-dealer business and entry into the investment advisory business;

~~Changes to our size and structure;~~◦Our Digital Assets subsidiary;

~~Our ability to acquire and integrate acquired companies;~~

~~Changes in our relationship with H&R Block, Inc. and the financial benefits of that relationship;~~

~~The outcome or impact of current or future litigation involving the Company;~~

◦Our ability to access the equity capital markets;

◦Access to adequate funding;

◦Our ability to manage our growth and deploy assets profitably;

◦Competition for customers from other banks and financial services companies;

◦Our ability to maintain and enhance our brand;

◦Reputational risk associated with any negative publicity;

A◦Failure or circumvention of our controls and procedures;

◦Extreme weather conditions, a natural disaster, especially in ~~California;~~California, rising sea levels, acts of war or terrorism, civil unrest, public health issues, or other adverse external events;

◦Increased regulation related to Environmental, Social and Governance factors

◦Our ability to retain the services of key personnel and attract, hire and retain other skilled managers;

◦Possible exposure to environmental liability;

◦Our dependence on third-party service providers for core banking and securities transactions technology;

◦Privacy concerns relating to our technology that could damage our reputation or deter customers from using our products and services;

◦Risk of systems failure and disruptions to operations;

◦Breach of information security measures and cybersecurity attacks;

◦Our reliance on ~~continued~~technology innovation;

◦The market price of our common stock may be volatile;

◦Our charter documents and ~~unimpeded access~~state law may delay or prevent a change of control or changes in our management;

◦Changes to our size and structure;

◦Our ability to acquire and integrate acquired companies; and

◦The outcome or impact of current or future litigation involving the ~~internet.~~Company;

The forward-looking statements contained in this Annual Report on Form 10-K are made on the basis of the views and assumptions of management regarding future events and business performance as of the date this Annual Report on Form 10-K is filed with the SEC. We do not undertake any obligation to update these statements to reflect events or circumstances occurring after the date this report is filed.

PART I

ITEM 1. BUSINESS

Overview

Axos Financial, Inc., is a financial holding company, a diversified financial services company with over ~~$11.2~~$17.4 billion in assets that provides banking and securities products and services to its customers through its online and low-cost distribution channels and affinity partners. Axos Bank has deposit and loan customers nationwide including consumer and business checking, savings and time deposit accounts and financing for single family and multifamily residential properties, small-to-medium size businesses in target sectors, and selected specialty finance receivables. The Bank generates fee income from consumer and business products including fees from loans originated for sale and transaction fees earned from processing payment activity. Our securities products and services are offered through Axos Clearing LLC ~~formerly known as COR Clearing, LLC~~ (“Axos Clearing”), ~~acquired on January 28, 2019~~and the entities Axos Invest, Inc. and Axos Invest ~~Inc. (formally known as WiseBanyan, Inc.) (“Axos~~LLC (together, “Axos Invest”), ~~acquired on February 26, 2019,~~ which generate interest and fee income by providing comprehensive securities clearing services to introducing broker-dealers and registered investment advisor correspondents and digital investment advisory services to retail investors, respectively. On August 2, 2021, Axos Clearing closed its acquisition of E*TRADE Advisor Services, a registered investment advisor custody business and renamed it Axos Advisor Services (“AAS”). The addition of AAS provides new sources of fee income and services that complement the Securities Business products, a proprietary, turnkey technology platform to attract new registered investment advisor custody business, and generate low-cost core deposits. Axos Clearing is a clearing broker-dealer registered with the SEC and the Financial Industry Regulatory Authority, Inc. (“FINRA”). Axos Invest is a Registered Investment Advisor under the Investment Advisers Act of 1940, that is registered with the SEC. ~~WiseBanyan Securities LLC,~~Axos Invest, Inc. is an introducing broker-dealer that is registered with the SEC and ~~FINRA was acquired together with Axos Invest on February 26, 2019.~~FINRA. Axos Financial, Inc.’s common stock is listed on the New York Stock Exchange and is a component of the Russell 2000^® Index, ~~and~~ the S&P SmallCap 600^® Index, the KBW Nasdaq Financial Technology Index, and the Travillian Tech-Forward Bank Index.

AtOn June 30, ~~2019, we~~2022, Axos had total assets of ~~$11,220.2 million,~~$17.4 billion, loans of ~~$9,420.2 million,~~$14.1 billion, investment securities of ~~$227.5 million,~~$0.3 billion, total deposits of ~~$8,983.2 million~~$13.9 billion and borrowings of ~~$627.4 million.~~$0.6 billion. Because we do not incur the significantly higher fixed operating costs inherent in a branch-based distribution system, ~~we are~~the Bank is able to rapidly grow our deposits and assets by providing a better value to our customers and by expanding our low-cost distribution channels.

Our business strategy is to grow our loan ~~and lease~~ originations and our deposits to achieve increased economies of scale and reduce the cost of products and services to our customers by leveraging our distribution channels and technology. We have designed our online banking platform and our workflow processes to handle traditional banking functions with elimination of ~~duplicate and unnecessary~~ paperwork and human intervention. Our Bank’s charter allows us to ~~operate~~conduct banking operations in all fifty states, and our online presence allows us increased flexibility to target a large number of loan and deposit customers based on demographics, geography and service needs. Our low-cost distribution channels provide opportunities to increase our core deposits and increase our loan originations by attracting new customers and developing new and innovative products and services. Our securities clearing and custody and digital ~~wealth~~investment management platforms provide a comprehensive set of technology, clearing, cash management and lending services targeted at independent registered investment advisors and introducing broker-dealers, principals and clients of advisory firms and individuals not affiliated with an investment advisor. ~~Our plan to integrate~~We are integrating our clearing and wealth management platforms with our banking platform ~~will~~to create an ~~easy to use~~easy-to-use platform for ~~customers~~customers’ banking and investing needs. ~~Over time we expect~~Additionally, our ~~Securities Business to generate~~securities clearing and custody businesses generates additional low-cost deposits, which ~~would be available to fund the Banking Business.~~serve as a source of funding for our Bank.

Our long-term business plan includes the following principal objectives:

•Maintain an annualized return on average common stockholders’ equity of 17.0% or better;

•Annually increase average interest-earning assets by 12% or more; and

•Maintain an annualized efficiency ratio at the Bank to a level 40% or lower.

Segment Information

We operate through two operating segments: Banking Business and Securities Business.

The Banking Business ~~includes~~has a broad range of banking services including online banking, concierge banking, ~~prepaid card services,~~ and mortgage, vehicle and unsecured lending through online and telephonic distribution channels to serve the needs of consumers and small businesses nationally. In addition, the Banking Business focuses on providing deposit products nationwide to industry verticals (e.g., Title and Escrow), cash management products to a variety of businesses, and commercial & industrial and commercial real estate lending to clients. The Banking Business ~~also~~ includes a bankruptcy trustee and fiduciary service that provides specialized software and consulting services to Chapter 7 bankruptcy and non-Chapter 7 trustees and fiduciaries.

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

~~Segment~~The operating segments and segment results of the Company are determined based upon the management reporting system, which assigns balance sheet and income statement items to each of the business ~~segments.~~segments and by which segment results are evaluated by the Chief Executive Officer in deciding how to allocate resources and in assessing performance. The process is designed around the organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions or in accordance with generally accepted accounting principles.

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

BANKING BUSINESS

We distribute our deposit products through a wide range of retail distribution channels, and our deposits consist of demand, savings and time deposits accounts. We distribute our loan products through our retail, correspondent and wholesale channels, and the loans we retain are primarily first mortgages secured by single family real property and by multifamily real property as well as commercial & industrial loans to businesses. Our ~~mortgage-backed~~ securities consist of mortgage pass-through securities issued by government-sponsored entities, non-agency collateralized mortgage obligations, municipal securities and ~~asset-backed mortgage-backed securities issued by private sponsors.~~whole business securities. We believe our flexibility to adjust our asset generation channels has been a competitive advantage allowing us to avoid markets and products where credit fundamentals are poor or rewards are not sufficient to support our required return on equity.

Our distribution channels for our bank deposit and lending products include:

~~Multiple~~•A national online banking ~~brands~~brand with tailored products targeted to specific consumer segments;

•Affinity groups where we gain access to the affinity group’s members, and our exclusive relationships with financial advisory firms;

•A ~~business~~commercial banking division focused on providing deposit products and loans to specific nationwide industry verticals (e.g., Homeowners’ Associations) and small and medium size businesses;

~~A commission-based~~•Commission-based lending sales force that operates from home, ~~offices focusing primarily on the origination of~~San Diego, and Salt Lake City and originates single ~~family~~ and multifamily mortgage ~~loans;~~

~~A commission-based lending sales force that operates from our San Diego office focusing on~~loans and commercial and industrial loans ~~to businesses;~~

~~A commission-based leasing sales force that operates from our Salt Lake City office focusing on commercial~~ and ~~industrial~~ leases to qualified businesses;

•A bankruptcy and non-bankruptcy trustee and fiduciary services team that operates from our Kansas City office ~~focusing~~focused on specialized software and consulting services that provide deposits; and

•Inside sales teams that originate loans and deposits from self-generated leads, third-party purchase leads, and from our retention and cross-sell of our existing customer ~~base.~~

base from both our Banking business and Securities business.

Banking Business - Asset Origination and Fee Income Businesses

~~We have~~The Bank has built diverse loan origination and fee income businesses that generate ~~attractive~~targeted financial returns through our digital distribution channels. We believe the diversity of our businesses and our direct and indirect distribution channels provide us with increased flexibility to manage through changing market and operating environments.

Single Family - Mortgage ~~Secured Lending~~& Warehouse

We generate earning assets and fee income from our mortgage lending activities, which consist of originating and servicing mortgages secured primarily by first liens on single family residential properties for consumers and providing warehouse lines of credit for ~~lender-finance businesses.~~third-party mortgage companies. We divide our ~~single family~~single-family mortgage originations between loans we retain and loans we sell. Our mortgage banking business generates fee income and gains from sales of those consumer single family mortgage loans we sell. Our loan portfolio generates interest income and fees from loans we retain. We also provide home equity loans for consumers secured by second liens on single family mortgages. ~~Our lender-finance loans are secured by our first lien on single family mortgages and include warehouse lines for third-party mortgage companies.~~

We originate fixed and ~~adjustable rate~~adjustable-rate prime residential mortgage loans using a paperless loan origination system and centralized underwriting and closing process. Many of our loans have initial fixed rate periods (five, seven or ten years) before starting a regular adjustment period (annually, semi-annually or monthly) as well as, interest rate floors, ceilings and rate change caps. We warehouse our mortgage banking loans and sell to investors ~~prime conforming~~conventional, government and ~~jumbo residential mortgage~~non-agency loans. Our mortgage servicing business includes collecting loan payments, applying principal and interest payments to the loan balance, managing escrow funds for the payment of mortgage-related expenses, such as taxes and insurance, responding to customer inquiries, counseling delinquent mortgagors and supervising foreclosures.

We originate single family mortgage loans for consumers through multiple channels on a retail, wholesale and correspondent basis.

•

•Retail. We originate single family mortgage loans direct to consumers through our relationships with large affinity groups, leads from referral partners, portfolio retention, cross-selling and acquiring leads from third parties.

•Wholesale. We have relationships with licensed mortgage brokers from which the Bank manages wholesale loan pipelines through our originations systems and websites. Through our secure website, our approved brokers can compare programs, terms and pricing on a real time basis and communicate with our staff.

• We originate single family mortgage loans directly through i) our multiple national online banking brand websites, where our customers can view interest rates and loan terms, enter their loan applications and lock in interest rates directly online, ii) our relationships with large affinity groups and iii) our call center which uses self-generated internet leads, third-party purchased leads, and cross-selling to our existing customer base.


•	~~Wholesale.~~ We have developed relationships with independent mortgage companies, cooperatives and individual loan brokers and we manage these relationships and our wholesale loan pipeline through our originations systems and websites. Through our secure website, our approved brokers can compare programs, terms and pricing on a real time basis and communicate with our staff.


•	Correspondent. We acquire closed loans from third-party mortgage companies that originate single family loans in accordance with our portfolio specifications or the specifications of our investors. We may purchase pools of seasoned, single-family loans originated by others during economic cycles when those loans have more attractive risk-adjusted returns than those we may originate.

We originate lender-finance loans to businesses secured by first liens on single family mortgage loans from cross selling, retail direct and through ~~third-parties~~third parties. Our warehouse customers are primarily generated through cross selling to our network of third-party mortgage companies approved to wholesale our consumer mortgage loans. Other lender-finance customers are generated by our commissions-based sales force dedicated to commercial & industrial lending who contact borrowers directly or through individual loan brokers.companies.

Multifamily and Commercial Mortgage ~~Secured Lending~~

We originate ~~adjustable rate~~adjustable-rate multifamily residential mortgage loans and project-based multifamily real-estate-secured loans with interest rates that adjust based on the American Interbank Offered Rate (“Ameribor”) or the Secured Overnight Financing Rate (“SOFR”). We hold existing adjustable-rate multifamily residential mortgage loans and project-based multifamily real-estate-secured loans with interest rates that adjust based on U.S. Treasury security yields and London Interbank Offered Rate (“LIBOR”). Many of our loans have initial fixed rate periods (three, five or seven years) before starting a regular adjustment period (annually, semi-annually or monthly) as well as prepayment protection clauses, interest rate floors ~~ceilings~~ and rate change caps.

We divide our multifamily residential mortgage ~~originations~~portfolio between the loans we retain and the loans we sell. Our mortgage banking business includes gains from those multifamily mortgage loans we sell. Our loan portfolio generates interest income and fees from the loans we retain.

We originate multifamily mortgage loans using a commission-based commercial lending sales force that operates from home offices across the United States or from our San Diego location. Customers are targeted through origination techniques such as direct mail marketing, personal sales efforts, email marketing, online marketing and print advertising. Loan applications are submitted electronically to centralized employee teams who underwrite, process and close loans. The sales force team members operate regionally both as retail originators for apartment owners and wholesale representatives to other mortgage brokers.

Commercial Real Estate Secured ~~and Commercial Lending~~

~~Our~~We originate loans across the U.S. secured by real estate properties under a variety of structures that we classify as commercial real ~~estate-secured~~estate (“CRE”). A few examples are as follows: Commercial Bridge to Sale, Commercial Bridge to Construction, Commercial Bridge to Refinance and Acquisition, Development, Construction, and Lender Finance. CRE Loans are originated by our sales force dedicated to commercial lending ~~consists of mortgages~~by contacting borrowers directly or by working with third-party partners or brokers to businesses secured by first liens on ~~commercial real estate. Historically, we have limited our exposure to commercial~~single family, multifamily, condominium, office, retail, mixed-use, hospitality, undeveloped or to-be-redeveloped land or small business loans. Repayment of CRE loans generally depends on the successful completion of the real estate transition project and ~~have primarily purchased seasoned mortgages~~permanent take-out or sale of the underlying assets on ~~small commercial properties when they were offered as a part~~the line. We attempt to mitigate risk by adhering to underwriting policies in evaluating the collateral and the creditworthiness of a residential mortgage loan pool. In fiscal 2015, we began to originate adjustable rate small balance commercial real estate loans with interest rates that adjust based on U.S. Treasury security yieldsborrowers and ~~LIBOR. Many~~guarantors.

Commercial & Industrial - Non-Real Estate (Non-RE)

Comprising the majority of our loans have initial fixed rate periods (three, five or seven years) before starting a regular adjustment period (annually, semi-annually or monthly) as well as prepayment protection clauses, interest rate floors, ceilings and rate change caps.

~~Our~~this portfolio are commercial and industrial ~~lending (“C&I”) is primarily comprised of real estate-backed and~~non-real estate, asset-backed loans, lines of credit and ~~leases~~term loans made to businesses and non-bank lenders. We started our C&I lending in 2010 with a focus on business cash flow lending and have subsequently moved to providing financing to non-bank lenders that originate lending productscommercial borrowers secured by ~~residential~~commercial assets, including, but not limited to, receivables, inventory and ~~commercial real estate assets. Our C&I lending has also expanded~~equipment. We typically reduce exposure in these loans by entering into a structured facility, under which we take a senior lien position collateralized by the underlying assets at advance rates well inside the collateral value. Commercial and industrial leases comprise the remainder of this portfolio and are primarily made based on the operating cash flows of the borrower or conversion of working capital assets to ~~other specialty commercial real estate lending types, as well as to other asset-based lending secured~~cash and secondarily on the underlying collateral provided by ~~non-real estate-related collateral.~~

~~Our C&I group also provides~~the borrower. We provide leases to small businesses and middle market companies that use the funds to purchase machinery, equipment and software essential to their operations. The lease terms are generally between two and ten years and amortize primarily to full repayment, or in some cases, to a de minimis residual ~~balance that is expected to be collected through the sale of the collateral to the lessee or to a third party.~~balance. The leases are offered nationwide to companies in targeted industries through a direct sales force and through independent third party sales referrals.

~~Specialty Finance Factoring~~

~~Our specialty finance division engages~~ Although commercial and industrial loans and leases are often collateralized directly or indirectly by equipment, inventory, accounts or loans receivable or other business assets, the liquidation of collateral in the ~~wholesale~~event of a borrower default may be an insufficient source of repayment because accounts or loans receivable may be uncollectible and ~~retail purchase~~inventories and equipment may be obsolete or of state lottery prize and structured settlement annuity payments. These payments are high credit quality deferred payment receivables having a state lottery commission or primarily highly rated insurance company payor. Purchases of state lottery prize or structured settlement annuity payments are governed by specific state statutes requiring judicial approval of each transaction. No transaction is funded before an order approving such transaction has been entered by a court of competent jurisdiction. Our commission-based sales force originates contracts for the retail purchase of such payments from leads generated by our dedicated research departmentlimited use. We attempt to mitigate these risks through the ~~use~~structuring of ~~proprietary research techniques. The Specialty Finance Division also utilizes direct mail and online marketing~~these lending products, adhering to ~~generate leads. Since 2013, pools~~underwriting policies in evaluating the management of ~~structured settlement receivables have been originated for sale depending upon management’s assessment of interest rate risk, liquidity, and offers containing favorable terms.~~

~~Prepaid Cards and Refund Transfer~~

Our prepaid cards division provides card issuing and bank identification number (“BIN”) sponsorship services to companies who have developed payroll, general purpose reloadable, incentive and gift card programs. BIN Sponsorship includes issuing debit and prepaid cards from BINs licensed to the ~~Bank by the various payment networks, managing risk for all programs, overseeing compliance with network and government regulations, and functioning as liaison between program managers~~business and the ~~payment networks. These programs generate fee income~~credit-worthiness of borrowers and ~~low-cost deposits.~~guarantors.

We are also responsible for the primary oversight and control of a refund transfer program under an agreement with Emerald Financial Services, LLC (“EFS”), a wholly owned subsidiary of H&R Block, Inc. (“H&R Block”). Under this program, the Bank opens a temporary bank account for each H&R Block customer who is receiving an income tax refund and elects to defer payment of his or her tax preparations fees. After the Internal Revenue Service and any state income tax authorities transfer the refund into the customer’s account, the net funds are transferred to the customer and the temporary deposit account is closed. We earn a fixed fee paid by H&R Block for each of the H&R Block customers electing a refund transfer.

Automobile Lending

Our automobile lending division originates prime and subprime loans to customers secured by new and used automobiles (“autos”). ~~In 2015 and 2016~~Our subprime loans are insured via a default risk mitigation product in which we ~~added systems and personnel to increase~~recoup a large percentage of the deficiency balance on charged off loans. We distribute our auto ~~lending portfolio. We~~loan products through direct and indirect channels, hold all of the auto loans that we ~~have originated~~originate and perform the loan servicing functions for these loans. Our loans carry a fixed interest rate for periods ranging from three to eight years and generate interest income and fees.

~~Other~~ Consumer ~~and Business~~ Lending

We originate fixed rate ~~term~~ unsecured loans to individual borrowers in all fifty states. We offer loans between $5,000 and ~~$35,000~~$50,000 with terms of ~~twelve, twenty-four,~~ thirty-six, forty-eight, sixty and ~~sixty~~seventy-two months to well qualified borrowers. The minimum credit score since 2018 is ~~680.~~700. All applicants apply digitally and ~~are required to supply proof of~~we validate income, identity and funding bank ~~account documentation.~~account. One hundred percent of loans are manually underwritten by a seasoned underwriter with a telephone interview conducted in respect of every approved loan prior to funding. We source our unsecured loans through existing bank customers, lead aggregators and additional marketing efforts.

~~Through our strategic partnerships division, our Bank establishes contractual relationships with third-party service providers~~Other

We also originate other loans, which include structure settlements, Small Business Administration (“SBA”) loans, and securities-backed loans. Structured settlements are originated through the wholesale and retail purchase of state lottery prize and structured settlement annuities. These annuities are high credit quality deferred payment receivables having a state lottery commission or primarily highly rated insurance company payor. Purchases of state lottery prize or structured settlement annuities are governed by specific state statutes requiring judicial approval of each transaction. Federal Paycheck Protection Program ~~Managers”~~(“PPP”) possessing demonstrated expertise in managing programs involving marketing and processing financial products such as credit, debit, and prepaid cards, and small business and consumer loans. These relationships include our relationships with H&R Block, Netspend and BFS Capital, among others. As delineatedloans made by the Bank under the Federal Coronavirus Aid, Relief and Economic Security Act (“CARES”) Act are guaranteed by the Small Business Administration (“SBA”) and, if the loan funds are used by the borrower for specific purposes as provided under the PPP, may be fully or partially forgiven by the SBA at which time, the Bank will receive funds related ~~contracts, a Program Manager~~to the PPP loan forgiveness directly from the SBA. The Bank also provides program management services in its areas of expertise subject to our Bank’s continuing control and active supervision of the subject program. Underwriting standards and credit decisioning remain with our Bank in all cases. Each of these relationships is designed to allow our Bank to leverage the Program Manager’s knowledge and experience to distribute program-related financial products to a broad base of customers. With respect to credit products, our Bank generally originates the resulting receivable for sale, but may, in its discretion, retain such receivable. Our Bank performs extensive due diligence with respect to each Program Manager and program, and maintains a regimen of comprehensive risk management and strict compliance oversight with respect to all programs. Under agreements with EFS and H&R Block, our Bank uses our underwriting guidelines and credit policies to offer and fund unsecuredsecurities-backed lines of credit (sbloc) to ~~consumers primarily through the H&R Block tax preparation offices and earns interest income and fee income. Our Bank retains 10%~~borrowers collateralized by marketable securities at advance rates generally less than 50% of these lines of credit and sells the remainder to H&R Block. Our Bank also originates or purchases interest-free loans to consumers that are offered primarily through H&R Block tax preparation offices. Our Bank has a limited guarantee from H&R Block that reduces our Bank’s credit exposure on these interest-free loans.

~~Our Bank also provides overdraft lines of credit for our qualifying deposit customers with checking accounts.~~

current fair market value.

Portfolio Management

Our investment analysis capabilities are a core competency of our organization. We decide whether to hold originated assets for investment or to sell them in the capital markets based on our assessment of the yield and risk characteristics of these assets as compared to other available opportunities to deploy our capital. Because risk-adjusted returns available on acquisitions may exceed returns available through retaining assets from our origination channels, we have elected to purchase loans and securities (see discussion below) from time to time. Some of our loans and security acquisitions were purchased at discounts to par value, which enhance our effective yield through accretion into income in subsequent periods.

Loan Portfolio Composition. The following table sets forth the composition of our loan ~~and lease~~ portfolio in amounts and percentages by type of loan at the end of each fiscal year-end for the last ~~five~~three years:

At June 30,
2019 2018 2017 2016 2015
(Dollars in thousands) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
Single family real estate secured:
Mortgage $ 4,278,822
45.3 % $ 4,198,941
49.3 % $ 3,901,754
52.4 % $ 3,678,520
57.5 % $ 2,980,795
59.6 %
Home equity 2,258
— % 2,306
— % 2,092
— % 2,470
— % 3,604
0.1 %
Warehouse and other 820,559
8.7 % 412,085
4.8 % 452,390
6.1 % 537,714
8.4 % 385,413
7.7 %
Multifamily real estate secured 1,948,513
20.6 % 1,800,919
21.1 % 1,619,404
21.7 % 1,373,216
21.5 % 1,185,531
23.7 %
Commercial real estate secured 326,154
3.4 % 220,379
2.6 % 162,715
2.2 % 121,746
1.9 % 61,403
1.2 %
Auto and RV secured 290,894
3.1 % 213,522
2.5 % 154,246
2.1 % 73,676
1.2 % 13,140
0.3 %
Factoring 93,091
1.0 % 169,885
2.1 % 160,674
2.1 % 98,275
1.5 % 122,200
2.4 %
Commercial & Industrial 1,653,314
17.5 % 1,481,051
17.4 % 992,232
13.3 % 514,300
8.0 % 248,584
5.0 %
Other 35,705
0.4 % 18,598
0.2 % 3,754
0.1 % 2,542
— % 601
— %
Total loans and leases held for investment 9,449,310
100.0 % 8,517,686
100.0 % 7,449,261
100.0 % 6,402,459
100.0 % 5,001,271
100.0 %
Allowance for loan and lease losses (57,085 ) (49,151 ) (40,832 ) (35,826 ) (28,327 )
Unamortized premiums/discounts, net of deferred loan fees (10,101 ) (36,246 ) (33,936 ) (11,954 ) (44,326 )
Net loans and leases held for investment $ 9,382,124
$ 8,432,289
$ 7,374,493
$ 6,354,679
$ 4,928,618


	At June 30,
	2022				2021				2020
(Dollars in thousands)	Amount		Percent		Amount		Percent		Amount		Percent
Single Family - Mortgage & Warehouse	$	3,988,462	28.0	%	$	4,359,472	37.8	%	$	4,722,304	44.2	%
Multifamily and Commercial Mortgage	2,877,680		20.2	%	2,470,454		21.4	%	2,263,054		21.1	%
Commercial Real Estate	4,781,044		33.5	%	3,180,453		27.5	%	2,297,920		21.5	%
Commercial & Industrial - Non-RE	2,028,128		14.2	%	1,123,869		9.7	%	885,320		8.3	%
Auto & Consumer	567,228		4.0	%	362,180		3.1	%	341,365		3.1	%
Other	11,134		0.1	%	58,316		0.5	%	193,479		1.8	%



Total loans held for investment	$	14,253,676	100.0	%	$	11,554,744	100.0	%	$	10,703,442	100.0	%
Allowance for credit losses	(148,617)				(132,958)				(75,807)
Unamortized premiums/discounts, net of deferred loan fees	(13,998)				(6,972)				3,714
Net loans held for investment	$	14,091,061			$	11,414,814			$	10,631,349

The following table sets forth the amount of loans maturing in our total loans held for investment based on the contractual terms to maturity:


	Term to Contractual Maturity
(Dollars in thousands)	Less Than Three Months		Over Three Months Through One Year		Over One Year Through Five Years		Over 5 Years Through 15 Years		Over 15 Years		Total
June 30, 2022	$	553,013	$	1,587,126	$	5,135,709	$	1,765,334	$	5,212,494	$	14,253,676

Term to Contractual Maturity
(Dollars in thousands) Less Than Three Months Over Three Months Through One Year Over One Year Through Five Years Over Five Years Total
June 30, 2019 $ 501,409
$ 772,607
$ 1,630,409
$ 6,544,885
$ 9,449,310

The following table sets forth the amount of our loans at June 30, ~~2019~~2022 that are due after June 30, ~~2020~~2023 and indicates whether they have fixed, floating or adjustable interest rates:

(Dollars in thousands) Fixed
Floating or
Adjustable¹
Total
Single family real estate secured:
Mortgage $ 72,858
$ 4,173,792
$ 4,246,650
Home equity 613
1,645
2,258
Warehouse and other 13,211
177,083
190,294
Multifamily real estate secured 52,880
1,851,655
1,904,535
Commercial real estate secured 14,934
300,620
315,554
Auto and RV secured 290,731
—
290,731
Factoring 82,993
—
82,993
Commercial & Industrial 329,933
779,398
1,109,331
Other 32,948
—
32,948
Total $ 891,101
$ 7,284,193
$ 8,175,294


(Dollars in thousands)	Fixed		Floating or Adjustable1		Total
Single Family - Mortgage & Warehouse	$	133,825	$	3,561,884	$	3,695,709
Multifamily and Commercial Mortgage	52,421		2,793,940		2,846,361
Commercial Real Estate	209,084		2,955,961		3,165,045
Commercial & Industrial - Non-RE	286,349		1,546,297		1,832,646
Auto & Consumer	563,993		—		563,993
Other	9,783		—		9,783



Total	$	1,255,455	$	10,858,082	$	12,113,537

¹ Included in this category are hybrid mortgages (e.g., 5/1 adjustable rate mortgages) that carry a fixed rate for an introductory term before transitioning to an adjustable rate.

Our mortgage loans are secured by properties primarily located in the western United States. The following table shows the largest states and regions ranked by location of these properties:


	At June 30, 2019											At June 30, 2022
	Percentage of Loan Principal Secured by Real Estate Located in State or Region											Percentage of Loan Principal Secured by Real Estate Located in State or Region
			Single family
State or Region	Total Real Estate Mortgage Loans		Mortgage		Home Equity		Multifamily real estate secured		Commercial real estate secured		State or Region	Total Real Estate Mortgage Loans		Single Family Mortgage		Multifamily real estate secured		Commercial Real Estate
California—south¹	55.12	%	53.79	%	52.08	%	58.30	%	55.12	%	California—south1	35.2	%	55.2	%	54.5	%	8.0	%
California—north²	17.08	%	15.46	%	10.43	%	20.11	%	21.66	%	California—north2	10.2	%	15.4	%	13.8	%	3.9	%
New York	9.47	%	11.56	%	11.38	%	4.67	%	8.56	%	New York	26.0	%	13.0	%	18.8	%	40.5	%
Florida	5.11	%	6.91	%	—	%	1.45	%	1.78	%	Florida	5.4	%	5.0	%	5.1	%	6.0	%
Arizona	1.66	%	2.28	%	2.25	%	0.48	%	—	%
Washington	1.44	%	1.07	%	5.99	%	2.40	%	0.82	%
Illinois	1.46	%	0.29	%	—	%	3.92	%	3.29	%
Hawaii	1.29	%	1.80	%	—	%	0.27	%	0.23	%
Colorado	0.99	%	0.71	%	—	%	1.45	%	2.03	%
New Jersey											New Jersey	3.2	%	0.8	%	0.1	%	7.0	%
Texas	0.86	%	0.70	%	—	%	1.14	%	1.36	%	Texas	2.0	%	0.6	%	0.6	%	3.9	%
District of Columbia											District of Columbia	1.8	%	0.3	%	0.1	%	4.0	%
Georgia											Georgia	1.7	%	0.3	%	0.1	%	3.9	%
Massachusetts											Massachusetts	1.1	%	0.7	%	—	%	2.0	%
Virginia											Virginia	1.1	%	0.2	%	—	%	2.4	%
All other states	5.52	%	5.43	%	17.87	%	5.81	%	5.15	%	All other states	12.3	%	8.5	%	6.9	%	18.4	%
	100.00	%	100.00	%	100.00	%	100.00	%	100.00	%		100.0	%	100.0	%	100.0	%	100.0	%

¹ Consists of mortgage loans secured by real property in California with ZIP Code ranges from 90000 to 92999.

² Consists of mortgage loans secured by real property in California with ZIP Code ranges from 93000 to 96999.

The ratio of the loan amount to the value of the property securing the loan is called the loan-to-value ratio (“LTV”). The following table shows the LTVs of our loan portfolio on weighted-average and median bases at June 30, ~~2019~~.2022. The LTVs were calculated by dividing (a) the loan principal balance less principal repayments by (b) the appraisal value of the property securing the loan.


			Single family
	Total Real Estate Mortgage Loans		Mortgage		Home Equity¹		Multifamily real estate secured		Commercial real estate secured			Total Real Estate Mortgage Loans		Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate
Weighted Average LTV	55.50	%	57.23	%	29.68	%	52.59	%	49.10	%	Weighted Average LTV	56	%	57	%	53	%	58	%
Median LTV	55.82	%	57.91	%	52.59	%	50.43	%	47.40	%	Median LTV	54	%	56	%	50	%	26	%

~~Changes in United States trade policies, including the imposition of tariffs and retaliatory tariffs, may adversely impact the Company’s business, financial condition and results of operations~~.

In the past two years there has been substantial debate and controversy concerning changes to United States trade policies, legislation, treaties and tariffs, including trade policies and tariffs affecting other countries, including China, the European Union, Canada and Mexico and retaliatory tariffs by such countries. Tariffs and retaliatory tariffs have been imposed have been imposed by the United States and other countries, and additional tariffs and retaliation tariffs have been proposed. If

prices of consumer goods or key industrial products increase materially as a result of tariffs, the ability of individual households to service debt may be negatively impacted. This could adversely affect the Company’s financial condition and results of operations.

~~Replacement of the LIBOR benchmark interest rate may have an impact on our business, financial condition or results of operations.~~

On July 27, 2017, the Financial Conduct Authority (FCA), a regulator of financial services firms in the United Kingdom, announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021. The FCA and the submitting LIBOR banks have indicated they will support the LIBOR indices through 2021 to allow for an orderly transition to an alternative reference rate. In the United States, efforts to identify a set of alternative U.S. dollar reference interest rates include proposals by the Alternative Reference Rates Committee of the Federal Reserve Board. Other financial services regulators and industry groups are evaluating the possible phase-out of LIBOR and the development of alternate reference rate indices or reference rates. Many of our assets and liabilities are indexed to LIBOR. We are evaluating the potential impact of the possible replacement of the LIBOR benchmark interest rate, but are not able to predict whether LIBOR will cease to be available after 2021, whether the alternative rates the Federal Reserve Board proposes to publish will become market benchmarks in place of LIBOR, or what the impact of such a transition will have on our business, financial condition, or results of operations.The market transition away from LIBOR to an alternative reference rate is complex and could have a range of adverse effects on our business, financial condition and results of operations. In particular any such transition could:

adversely affect the interest rates paid or received on, the revenue and expenses associate with, and the value of our floating-rate obligations, loans, deposits, derivatives, and other financial instruments tied to LIBOR rates, or other securities or financial arrangements given LIBOR’s role in determining market interest rates globally;

~~prompt inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with an alternative reference rate;~~

~~result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of certain fallback language in LIBOR-based securities; and~~

require the transition to or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on the applicable alternative pricing benchmark.

Risks Relating to Mortgage Loans and Mortgage-Backed Securities

Declining real estate values, particularly in California, could reduce the value of our loan and lease portfolio and impair our profitability and financial condition.

The majority of the loans in our portfolio are secured by real estate. At June 30, ~~2019,~~2022, approximately ~~72.2%~~45.4% of our mortgage portfolio was secured by real estate located in California. In recent years, there has been significant volatility in real estate values in ~~California and in some cases the collateral for our real estate loans has become less valuable.~~California. If real estate values decrease or more of our borrowers experience financial difficulties, we will experience increased charge-offs, as the proceeds resulting from foreclosure may be significantly lower than the amounts outstanding on such loans. In addition, declining real estate values frequently accompany periods of economic downturn or recession and increasing unemployment, all of which can lead to lower demand for mortgage loans of the types we originate. A decline of real estate values or decline of the credit position of our borrowers in California would have a material adverse effect on our business, prospects, financial condition and results of operations.

Many of our mortgage loans are ~~unseasoned~~multifamily residential loans and defaults on such loans would harm our business.

At June 30, ~~2019,~~2022, our multifamily residential loans were ~~$1,948.5~~$2,085.1 million or ~~29.7%~~15% of our ~~mortgage loans and our commercial real estate loans were $326.2 million, or 5.0% of our mortgage loans.~~loan portfolio. The payment on such loans is typically dependent on the cash flows generated by the projects, which are affected by the supply and demand for multifamily residential units and commercial property within the relative market. If the market for multifamily residential units and commercial property experiences a decline in demand, multifamily and commercial borrowers may suffer losses on their projects and be unable to repay their loans. If residential housing values were to decline ~~and~~or nationwide unemployment ~~were to increase,~~levels rise, we are likely to experience increases in the level of our non-performing loans and ~~foreclosed and repossessed vehicles~~foreclosures in future periods.

~~We could recognize other-than-temporary impairment on securities held in our available-for-sale portfolio.~~

We analyze securities held in our portfolio for other-than-temporary impairment on a quarterly basis. The process for determining whether impairment is other-than-temporary can involve difficult, subjective judgments about the future financial performance of the issuer, market conditions, and the value of any collateral underlying the security in order to assess the probability of receiving all contractual principal and interest payments on the security. Because of changing economic and market conditions affecting issuers and the performance of the underlying collateral, we may be required to recognize other-than-temporary impairment in future periods reducing future earnings and capital levels.

A decrease in the mortgage buying activity of Fannie Mae, Freddie Mac, and MBS’s guaranteed by Ginnie Mae or a failure by Fannie Mae, Ginnie Mae, and Freddie Mac to satisfy their obligations with respect to their RMBS could have a material adverse effect on our business, financial condition and results of operations.

During the last three fiscal years we have sold ~~approximatly $1,321.7 million~~approximately $2.8 billion of residential mortgage loans to Fannie Mae and Freddie Mac and into MBS’s guaranteed by Ginnie ~~Mae and, as~~Mae. As of June 30, ~~2019,~~2022, approximately ~~4.2%~~9.6% of our securities portfolio consisted of RMBS issued or guaranteed by these GSEs. Since 2008, Fannie Mae and Freddie Mac have been in conservatorship, with its primary regulator, the Federal Housing Finance Agency, acting as conservator. The United States government may enact structural changes to one or more of the GSEs, including privatization, consolidation and/or a reduction in the ability of GSEs to purchase mortgage loans or guarantee mortgage obligations. We cannot predict if, when or how the conservatorships will end, or what associated changes (if any) may be made to the structure, mandate or overall business practices of either of the GSEs. Accordingly, there continues to be uncertainty regarding the future of the GSEs, including whether they will continue to exist in their current form and whether they will continue to meet their obligations with respect to their RMBS. A substantial reduction in mortgage purchasing activity by the GSEs could result in a material decrease in the availability of residential mortgage loans and the number of qualified borrowers, which in turn may lead to increased volatility in the residential housing market, including a decrease in demand for residential housing and a corresponding drop in the value of real property that secures current residential mortgage loans, as well as a significant increase in interest rates. In a rising or higher interest rate environment, our originations of mortgage loans may decrease, which would result in a decrease in mortgage loan revenues and a corresponding decrease in non-interest income. Any decision to change the structure, mandate or overall business practices of the GSEs and/or the relationship among the GSEs, the government and the private mortgage loan markets, or any failure by the GSEs to satisfy their obligations with respect to their RMBS, could have a material adverse effect on our business, financial condition and results of operations.

Commercial and industrial and commercial real estate loans may expose our company to greater financial and credit risk than other loans.

Our commercial and industrial loans as well as our commercial real estate – mortgage portfolio is increasing and was approximately $2,028.1 million and $4,781.0 million at June 30, 2022, comprising approximately 14.2% and 33.5% of our total loan portfolio, respectively. Commercial loans generally carry larger loan balances and can involve a greater degree of financial and credit risk than other loans. Any significant failure to pay on time by our customers could hurt our earnings. The ~~Tax Reform Act~~increased financial and credit risk associated with these types of ~~2017 resulted~~loans are a result of several factors, including the concentration of principal in ~~certain changes~~a limited number of loans and borrowers, the types of business and collateral, the size of loan balances, the effects of general economic conditions on income-producing properties and businesses and the increased difficulty of evaluating and monitoring these types of loans.

Our mortgage origination business is subject to fluctuations based upon seasonal and other factors and, as a result, our results of operations for any given quarter may not be indicative of the results that may ~~affect our business.~~be achieved for the full fiscal year.

~~The Tax Reform Act~~Our mortgage origination business is subject to several variables that can impact loan origination volume, including seasonal and interest rate fluctuations. We typically experience increased loan origination volume from purchases of ~~2017, enacted~~homes during the second and third calendar quarters, when more people tend to move and buy or sell homes. In addition, an increase in ~~December 2017, reduced~~ the ceiling on the mortgage interest deduction from $1,000,000 to $750,000 for indebtedness incurred in acquiring, constructing, or improving a residence. For mortgage indebtedness incurred before December 15, 2017, the Tax Reform Act permits homeowners to maintain the current $1,000,000 ceiling. The Tax Reform Act also prohibits the deductiongeneral level of interest ~~on home equity indebtedness, and limits annual itemized deductions~~rates may, among other things, adversely affect the demand for ~~state and local taxes (including state and local income, property, and sales taxes) to $10,000. The Bank originates and holds a large amount of~~ mortgage loans and our ability to originate mortgage ~~backed securities. The reduction or elimination of these tax benefits and other changes in federal income tax policies could have a material adverse effect on~~loans. In particular, if mortgage interest rates increase, the demand for ~~the Bank’s loan products~~residential mortgage loans and the ~~pricing and liquidity~~refinancing of ~~the~~residential mortgage ~~securities~~loans will likely decrease, which the Bank holds. The reduction in the mortgage interest deduction and limitation of itemized deductions for property taxes, particularly in higher priced states in which we operate, such as California, could adversely affect the ability of some potential borrowers to obtain credit, otherwise reduce the demand for home purchases and construction, and increase delinquencies or defaults on our mortgage assets, which couldwill have ~~a material~~an adverse effect on our ~~business~~mortgage origination activities. Conversely, a decrease in the general level of interest rates, among other things, may lead to increased competition for mortgage loan origination business.

As a result of these variables, our results of operations for any single quarter are not necessarily indicative of the results that may be achieved for a full fiscal year or any other quarter.

Risks Relating to our Business Operations

Our results of operations could vary as a result of the methods, estimates, and judgments that we use in applying our accounting policies, including with respect to our allowance for credit losses.

From time to time, the Financial Accounting Standards Board (the “FASB”) and the SEC change the financial accounting and reporting standards that govern the preparation of our financial statements. In addition, the FASB, SEC, bank regulators and outside independent auditors may revise their previous interpretations regarding existing accounting regulations and the application of these accounting standards. The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations. Such methods, estimates and judgments, include methodologies to value our securities, estimate our allowance for loan losses and the realization of deferred tax assets and liabilities. These methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead us to change our methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect our results of operations. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations.

~~Risks Relating to the Company~~

If our allowance for ~~loan and lease~~credit losses, particularly in growing areas of lending such as commercial and industrial (“C&I”) is not sufficient to cover actual ~~loan and lease~~credit losses, our earnings, capital adequacy and overall financial condition may suffer materially.

Our loans are generally secured by single family, multifamily and commercial real estate properties, each initially having a fair market value generally greater than the amount of the loan secured. Although our loans and leases are typically secured, the risk of default, generally due to a borrower’s inability to make scheduled payments on his or her loan, is an inherent risk of the banking business. In determining the amount of the allowance for loan and lease losses, we make various assumptions and judgments about the ~~collectability~~collectibility of our loan and lease portfolio, including the creditworthiness of our borrowers, the value of the real estate serving as collateral for the repayment of our loans and our loss history. Defaults by borrowers could result in losses that exceed our loan and lease loss reserves. We have originated or purchased many of our loans and leases recently, so we do not have sufficient repayment experience to be certain whether the established allowance for loan and lease losses is adequate. We may have to establish a larger allowance for loan and lease losses in the future if, in our judgment, it becomes necessary. Any increase in our allowance for loan and lease losses would increase our expenses and consequently may adversely affect our profitability, capital adequacy and overall financial condition.

In addition, we continue to increase our emphasis on non-residential lending, particularly in C&I lending, and these types of loans and leases are expected to comprise a larger portion of our originations and loan and lease portfolio in future periods. To the extent that we fail to adequately address the risks associated with C&I lending, we may experience increases in levels of non-performing loans and leases and be forced to ~~take~~incur additional loan and lease loss ~~reserves,~~provision expense, which would adversely affect our net

interest income and capital levels and reduce our profitability. For further information about our C&I lending business, please refer to “Business –- Asset Origination and Fee Income Businesses –- Commercial Real Estate Secured and Commercial Lending.”

~~Our results of operations could vary as a result of the methods, estimates, and judgments that we use in applying our accounting policies.~~

The methods, estimates, and judgments that we use in applying our accounting policies have a significant impact on our results of operations. Such methods, estimates, and judgments, include methodologies to value our securities, evaluate securities for other-than-temporary impairment and estimate our allowance for loan and lease losses. These methods, estimates, and judgments are, by their nature, subject to substantial risks, uncertainties, and assumptions, and factors may arise over time that lead us to change our methods, estimates, and judgments. Changes in those methods, estimates, and judgments could significantly affect our results of operations. These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. As an example, the Financial Accounting Standards Board issued accounting guidance, effective for reporting periods beginning after December 15, 2019, related to the impairment of financial instruments, particularly the allowance for loan losses. This guidance changes existing impairment recognition to a model that is based on expected losses rather than incurred losses, which is intended to result in more timely recognition of credit losses. When adopted, this new standard may increase our allowance for credit losses, which could materially affect our financial condition and future results of operations. The extent of the increase, if any, will ultimately depend upon the nature and characteristics of our loan portfolio at the adoption date, as well as the macroeconomic assumptions and forecasts used at that date. Therefore, the potential financial impact is currently unknown.

Changes in the value of goodwill and other intangible assets could reduce our earnings.

The Company accounts for goodwill and other intangible assets in accordance with generally accepted accounting principles (“GAAP”), which, in general, requires that goodwill not be amortized, but rather that it be tested for impairment at least annually at the reporting unit level using the two step approach. Testing for impairment of goodwill and other intangible assets is performed annually and involves the identification of reporting units and the estimation of fair values. The estimation

of fair values involves a high degree of judgment and subjectivity in the assumptions used. Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability, and may materially impact the fair value of publicly traded financial institutions and could result in an impairment charge at a future date.

Our risk management processes and procedures may not be effective in mitigating our risks.

We have established processes and procedures intended to identify, measure, monitor and control material risks to which we are subject, including, for example, credit risk, market risk, liquidity risk, strategic risk and operational risk. If the models that we use to manage these risks are ineffective at predicting future losses or are otherwise inadequate, we may incur unexpected losses or otherwise be adversely affected. In addition, the information we use in managing our credit and other ~~risk~~risks may be inaccurate or incomplete as a result of error or fraud, both of which may be difficult to detect and avoid. There may also be risks that exist, or that develop in the future, that we have not appropriately anticipated, identified or mitigated, including when processes are changed or new products and services are introduced. If our risk management framework does not effectively identify and control our risks, we could suffer unexpected losses or be adversely affected, and that could have a material adverse effect on our business, results of operations and financial ~~condition~~condition.

Higher FDIC assessments could negatively impact profitability.

FDIC insurance premiums are “risk based”. Accordingly, higher premiums are charged to banks that have lower capital ratios or higher risk profiles, including increased commercial and industrial lending, declining credit quality metrics, and increased brokered deposits and higher levels of borrowing. As a result, a decrease in the Bank’s capital ratios, or a negative evaluation by the FDIC, may increase the Bank’s net funding cost and reduce its earnings.

Our ~~acquisition of a~~ broker-dealer business ~~subject~~subjects us to a variety of risks associated with the securities industry.

On January 28, 2019, we acquired COR Clearing, a leading full-service correspondent clearing firm for independent broker-dealers. In addition, in February 2019 we acquired an introducing broker as part of our acquisition of the WiseBanyan entities. Our ~~acquisition of these~~ broker-dealer ~~firms and entry into this~~ business subjects us to a number of risks and challenges, including risks related to our ability to integrate the acquired operations and the associated internal controls and regulatory functions into our current ~~operations,~~operations; our ability to retain key personnel of the acquired ~~operations,~~operations; our ability to limit the outflow of acquired deposits and successfully retain and manage acquired ~~assets,~~assets; our ability to retain existing correspondents who may choose to perform their own clearing services, move their clearing business to one of our competitors or exit the ~~business,~~business; our ability to attract new customers and generate new assets in areas not previously ~~served,~~served; and the possible assumption of risks and liabilities related to litigation or regulatory proceedings involving the acquired operations.

In addition, ~~entry into~~ the broker-dealer business may subject us to new risks related to the movement of equity prices. For example, if securities prices decline rapidly, the value of our collateral could fall below the amount of the indebtedness secured by these securities, and in rapidly appreciating markets, credit risk may increase due to short positions. The securities lending and securities trading and execution businesses also subject us to credit risk if a counterparty fails to perform or if collateral

securing ~~its~~the counterparty’s obligations is insufficient. In securities transactions generally, we will be subject to credit risk during the period between the execution of a trade and the settlement by the customer. Significant failures by our customers, including correspondents, or clients to honor their obligations, or increases in their rates of default, together with insufficient collateral and reserves, could have a material adverse effect on our business, financial condition, results of operations and cash flows. For example, in March 2019, we suffered a $15.3 million bad debt expense due to a default by a correspondent customer arising from unauthorized securities trades by an employee of the customer. Additionally, poor investment returns and declines in client assets, due to either general market conditions or under-performance (relative to our competitors or to benchmarks) of our investment products, may affect our ability to retain existing assets, prevent clients from transferring their assets out of products or their accounts, or inhibit our ability to attract new clients or additional assets from existing clients. Any such poor performance could adversely affect our advisory and custody business and the fees that we earn on client assets.

Our broker-dealer business is also subject to regulatory requirements and risks discussed above under “Our broker-dealer and investment advisory businesses subjects us to regulatory risks”. Our broker-dealer business also ~~subjects~~exposes us to ~~new~~other risks and uncertainties that are common in the securities industry, including intense competition, ~~extensive governmental regulation by the Securities and Exchange Commission and FINRA~~ and potentially new areas and types of litigation including lawsuits based on allegations concerning our correspondents. ~~The SEC, FINRA~~For example, we allow our brokerage customers to engage in self-directed trading, and ~~other SROs~~there has been an increase in regulatory enforcement and ~~state~~ securities ~~commissions, among other regulatory bodies, can censure, fine, issue cease-and-desist orders~~litigation against broker-dealers with self-directed trading platforms. These actions may become more common or ~~suspend or expel~~frequent, particularly if there is a ~~broker-dealer or any~~prolonged decrease in equity prices resulting in investor losses. Allegations of its officers or employees. Clearing securities firms are subject to substantially more regulatory control and examination than introducing brokers that rely on others to perform clearing functions. Similarly, the attorneys generalviolations of ~~each state could bring legal action to ensure compliance with state~~ securities laws and regulatory agencies in foreign countries have similar authority. Our ability to comply with multiple laws and regulations pertaining to the securities industry depends in large part on our ability to establish and maintain an effective compliance function. The failure to establish and enforce reasonable compliance procedures,or FINRA rules, even if ~~unintentional,~~not ultimately asserted or proved, could ~~subject us~~substantially impact our results of operations and lead to ~~significant losses or disciplinary or other actions.~~reputational harm.

Our broker-dealer business is also subject to the net capital requirements of the SEC, FINRA and various self-regulatory organizations. These requirements typically specify the minimum level of net capital a broker-dealer must maintain and also mandate that a significant part of its assets be kept in relatively liquid form. Failure to maintain the required net capital may subject a firm to limitation of its activities, including suspension or revocation of its registration by the SEC and suspension or expulsion by FINRA and other regulatory bodies, and ultimately may require its liquidation.

~~Our entry into~~Risks associated with our Digital Assets Subsidiary

In the ~~investment advisory business subjects us~~future, our subsidiary Axos Digital Assets LLC (“ADA”) plans to: (1) make available to retail customers a platform for buying and selling non-security digital assets such as Bitcoin and Ethereum and (2) issue a dollar-backed stablecoin to facilitate the buying and selling of digital assets on its trading platform. Cybersecurity risks exist in trading cryptocurrencies, using wallets to hold cryptocurrencies, and stablecoins to facilitate transactions in cryptocurrencies, include hacking vulnerabilities and cybersecurity attacks. A cybersecurity event could result in a substantial, immediate and irreversible loss for future customers, including retail investors, that trade or own cryptocurrencies. Cryptocurrency transactions may be irreversible, and, accordingly, losses due to a ~~variety~~cybersecurity event may not be recoverable and beyond available insurance coverage, if any, for some or all of ~~risks associated with investment performance~~those losses and ~~advisory services.~~

On February 26, 2019, we acquired WiseBanyan, Inc., a registered investment adviser (“RIA”) that provides personal financial and investment management services through a proprietary technology platform. Our investment advisory business is registered with the SEC under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). Federally registered investment advisers are regulated and subject to examination by the SEC. The Advisers Act imposes numerous obligations on RIAs, including fiduciary duties, disclosure obligations, recordkeeping and reporting requirements, marketing restrictions and general anti-fraud prohibitions. Our failure to comply with the Advisers Act and associated rules and regulations of the SEC could subject us to enforcement proceedings and sanctions for violations, including censure or termination of SEC registration, litigation and reputational harm. In addition, our investment advisory business is subject to notice filings and the anti-fraud rules of state securities regulators.

Our investment advisory business is also subject to various data privacy and cybersecurity laws designed to protect client and employee personally identifiable information. These laws and regulations are increasing in complexity and number which has resulted in greater compliance risk and cost for the business. The unauthorized access, use, theft or destruction of client or employee personal, financial or other data could expose us to potential financial penalties and legal liability.

Additionally, poor investment returns and declines in client assets in our investment advisory business, due to either general market conditions or under-performance (relative to our competitors or to benchmarks) by investment products, may affect our ability to retain existing assets, prevent clients from transferring their assets out of products or their accounts, or inhibit our ability to attract new clients or additional assets from existing clients. Any such poor performance could adversely affect our investment advisory business and the advisory fees that we earn on client assets.

~~Our acquisitions involve integration and other risks.~~

In addition to the acquisitions discussed above, from time to time we undertake acquisitions of assets, deposits, lines of business and other companies consistent with our operating and growth strategies. Acquisitions generally involve a number of risks and challenges, including our ability to integrate the acquired operations and the associated internal controls and regulatory functions into our current operations, our ability to retain key personnel of the acquired operations, our ability to limit the outflow of acquired deposits and successfully retain and manage acquired assets, our ability to attract new customers and generate new assets in areas not previously served, and the possible assumption of risks and liabilities relatedlead to litigation or regulatory ~~proceedings involving~~investigations or enforcement matters. Moreover, the ~~acquired operations. Additionally, no assurance can be given that the operation~~prices of acquisitions would not adversely affect our existing profitability, that we would be able to achieve results in the future similar to those achieved by the acquired operations, that we would be able to compete effectively in the markets served by the acquired operations, or that we would be

able to manage any growth resulting from the transaction effectively. We also face the risk that the anticipated benefits of any acquisition may not be realized fully or at all, or within the time period expected.

~~As a public company, we face the risk of shareholder lawsuits and other related or unrelated litigation, particularly if we experience declines~~cryptocurrencies are extremely volatile. Fluctuations in the price of our common stock. We have been named as a party to purported class action and derivative lawsuits, and we may be named in additional litigation, all of which could require significant management time and attention and result in significant legal expenses.

~~As described in detail below in “Item 3 – Legal Proceedings,” putative class action lawsuits have been filed~~various cryptocurrencies might cause uncertainty in the ~~United States District Court, Southern District~~market and could negatively impact trading volumes of ~~California, alleging, among other things, that our Company, Chief Executive Officer~~cryptocurrencies, which may adversely affect the success of any future business, financial condition and ~~Chief Financial Officer violated the federal securities laws~~results of operations. In addition, different aspects of cryptocurrencies are regulated by ~~failing~~both Federal and State authorities. Cryptocurrency market disruptions, including those affecting stablecoins, and resulting governmental interventions are unpredictable, and might make cryptocurrencies, or certain cryptocurrency business activities, impractical or illegal altogether. As regulation of cryptocurrencies continues to ~~disclose the wrongful conduct that~~evolve, there is alleged by a former employee in a complaint, and that as a result the Company’s statements regarding its internal controls, and portions of its financial statements, were false and misleading. Derivative lawsuits have also been filed against our management arising from the same events, alleging breach of fiduciary duty, mismanagement, abuse of control and unjust enrichment. Regardless of the merits, the expense of defending such litigation may have a substantial ~~impact if our insurance carriers fail~~risk of inconsistent regulatory guidance among federal and State agencies and among State governments which, along with potential accounting and tax issues or other requirements relating to ~~cover~~cryptocurrencies, could impede future cryptocurrency operations. Cryptocurrency regulations and accounting rules are complex and changing and subject to interpretation by bank and securities regulators, and other regulatory bodies formed to promulgate and interpret accounting principles such as the ~~full cost of the litigation,~~FASB. A change in these rules and the time required to defend the actions could divert management’s attention from the day-to-day operations of our business, which could adversely affect our business, results of operations and cash flows. An unfavorable outcome in such litigationregulations or interpretations could have a ~~material adverse~~significant effect on ~~our business,~~ financial ~~condition, results~~results. Cryptocurrency trading platform providers may be required to obtain licenses to operate as a money transmitter (or as another type of ~~operations~~regulated financial services institution, as applicable) in the States where this is required. Money transmitters are subject to obligations and ~~cash flows. The Company~~restrictions with respect to the investment of customer funds, reporting requirements, bonding requirements, and ~~its management deny~~inspection by State regulatory agencies. There are substantial costs and potential product and operational changes involved in maintaining and renewing these licenses, certifications, and approvals, and providers could be subject to fines, other enforcement actions, and litigation if found to violate any ~~wrongdoing and are vigorously defending the referenced lawsuits.~~of these requirements.

We may seek additional capital, but it may not be available when it is needed, ~~and~~which would limit our ability to execute our strategic plan. In addition, raising additional equity capital would dilute existing shareholders’ equity interests and may cause our stock price to decline.

We are required by regulatory authorities to maintain adequate levels of capital to support our operations. In addition, we may elect to raise additional capital to support the growth of our business or to finance acquisitions, if any, or we may elect to raise additional capital for other reasons. We may seek to do so through the issuance of, among other things, our common stock or securities convertible into our common stock, which could dilute existing shareholders’ interests in the Company.

Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions, our financial performance and a number of other factors, many of which are outside our ~~control, and on our financial performance.~~control. Accordingly, we cannot provide assurance on our ability to raise additional capital if needed or ifwhether it can be raised on terms acceptable to us. If we cannot raise additional capital when needed or on terms acceptable to us, it may have a material adverse effect on our financial condition, results of operations and prospects. In addition, raising equity capital will have a dilutive effect on the equity interests of our existing shareholders and may cause our stock price to decline.

~~Access~~

Liquidity and access to adequate funding cannot be assured.

WeLiquidity is essential to our business and the inability to raise funds through deposits, borrowings, equity and debt offerings, or other sources could have ~~significant sources~~a materially adverse effect on our liquidity. The Bank may not be able to meet the cash flow requirements of ~~liquidity~~its customers who may be either depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs. Company specific factors such as a ~~result~~decline in our credit rating, an increase in the cost of capital from financial capital markets, a decrease in business activity due to adverse regulatory action or other company specific event, or a decrease in depositor or investor confidence may impair our ~~federal thrift structure, including deposits, brokered deposits,~~access to funding with acceptable terms adequate to finance our activities. General factors related to the ~~FHLB, repurchase lending facilities, and the FRB discount window.~~financial services industry such as a severe disruption in financial markets, a decrease in industry expectations, or a decrease in business activity due to political or environmental events may impair our access to liquidity. We rely primarily upon deposits and FHLB advances. Our ability to attract deposits could be negatively impacted by a public perception of our financial prospects or by increased deposit rates available at troubled institutions suffering from shortfalls in liquidity. The FHLB isadvances and the FRBSF discount window are subject to regulation and other factors beyond our control. These factors may adversely affect the availability and pricing of advances to members such as the Bank. Selected sources of liquidity may become unavailable to the Bank if it were to no longer be considered “well-capitalized.”

Our inability to manage our growth or deploy assets profitably could harm our business and decrease our overall profitability, which may cause our stock price to decline.

Our assets and deposit base have grown substantially in recent years, and we anticipate that we will continue to grow over time, perhaps significantly. To manage the expected growth of our operations and personnel, we will be required to manage multiple aspects of the business simultaneously, including among other things: (i) improve existing and implement new transaction processing, operational and financial systems, procedures and controls; (ii) maintain effective credit scoring and underwriting guidelines; (iii) maintain sufficient levels of regulatory capital; and (iv) expand our employee base and train and manage this growing employee base. In addition, acquiring other banks, asset pools or deposits may involve risks such as exposure to potential asset quality issues, disruption to our normal business activities and diversion of management’s time and attention due to integration and conversion efforts. If we are unable to manage growth effectively or execute integration efforts properly, we may not be able to achieve the anticipated benefits of growth and our business, financial condition and results of operations could be adversely affected.

In addition, we may not be able to sustain past levels of profitability as we grow, and our past levels of profitability should not be considered a guarantee or indicator of future success. If we are not able to maintain our levels of profitability by deploying growth in our deposits in profitable assets or investments, our net interest margin and overall level of profitability will decrease and our stock price may decline.

We face strong competition for customers and may not succeed in implementing our business strategy.

Our business strategy depends on our ability to remain competitive. There is strong competition for customers from existing banks and other types of financial ~~institutions, including~~institutions. Technology and other changes allow parties to complete financial transactions through alternative methods rather than through banks. Consumers can now maintain funds that would have historically been held as bank deposits in brokerage accounts, mutual funds or general-purpose reloadable prepaid cards. Consumers can also complete transactions, such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those ~~that use the Internet as a medium for banking transactions or as an advertising platform.~~deposits. Technology has also lowered barriers to entry and made it possible for ~~non-banks~~non-bank, financial technology companies (“FinTechs”) to offer products and services traditionally provided by banks. FinTechs continue to emerge and compete with traditional financial institutions across a wide variety of products and services. Consumers have demonstrated a growing willingness to obtain banking services from FinTechs. As a result, our ability to remain competitive is increasingly dependent upon our ability to maintain critical technological capabilities, and to identify and develop new, value-added products for existing and future customers. Our competitors also include large, publicly-traded, ~~Internet-based~~internet-based banks, as well as smaller ~~Internet-based~~internet-based banks; “brick and mortar” banks, including those that have implemented websites to facilitate online banking; and traditional banking institutions such as thrifts, finance companies, credit unions and mortgage banks. Some of these competitors have been in business for a long time and have broader name recognition and a more established customer base. Most of our competitors are larger and have greater financial and personnel resources. In order to compete profitably, we may need to reduce the rates we offer on loans and leases and investments and increase the rates we offer on deposits, which actions may adversely affect our business, prospects, financial condition and results of operations.

To remain competitive, we believe we must successfully implement our business strategy. Our success depends on, among other things:

•Having a large and increasing number of customers who use our bank for their banking needs;

•Our ability to attract, hire and retain key personnel as our business grows;

•Our ability to secure additional capital as needed;

•The relevance of our products and services to customer needs and demands and the rate at which we and our competitors introduce or modify new products and services;

•Our ability to offer products and services with fewer employees than competitors;

•The satisfaction of our customers with our customer service;

•Ease of use of our websites and smartphone applications;

•Our ability to provide a secure and stable technology platform for financial services that provides us with reliable and effective operational, financial and information systems; and

•Integration of our broker-dealer and registered investment-advisory businesses.

If we are unable to implement our business strategy, our business, prospects, financial condition and results of operations could be adversely affected.

Our business depends on a strong brand, and failing to maintain and enhance our brand could hurt our ability to maintain or expand our customer base.

The brand identities that we have developed will significantly contribute to the success of our business. ~~On October 1, 2018, we changed the name of the Bank and the branding of most of our banking products to “Axos Bank”.~~ Maintaining and enhancing the “Axos Bank” brands (including our other trade styles and trade names) is critical to expanding our customer base. We believe that the importance of brand recognition will increase due to the relatively low barriers to entry for our “brick and mortar” competitors in the internet-based banking market. Our brands could be negatively impacted by a number of factors, including data privacy and security issues, service outages, product malfunctions, and ~~product malfunctions.~~trademark infringement. If ~~our name change is not widely accepted by customers or proves to be less popular than anticipated, if~~ we fail to maintain and enhance our brands generally, or if we incur excessive expenses in these efforts, our business, financial condition and results of operations may be adversely affected. ~~In addition, maintaining and enhancing our brand will depend on our ability to continue to provide high-quality products and services, which we may not do successfully.~~

Our reputation and business could be damaged by negative publicity.

Reputational risk, including as a result of negative publicity, is inherent in our business. Negative publicity can result from actual or alleged conduct in a number of areas, including legal and regulatory compliance, lending practices, corporate governance, litigation, inadequate protection of customer data, illegal or unauthorized acts taken by third parties that supply products or services to us, and ethical behavior of our employees. Damage to our reputation could adversely impact our ability to attract new, and maintain existing, loan and deposit customers, employees and business relationships, and, particularly with respect to our broker-dealer and registered investment ~~advisor~~adviser businesses, could result in the imposition of new regulatory requirements, operational restrictions, enhanced supervision and/or civil money penalties. Such damage could also adversely

affect our ability to raise additional capital. Any such damage to our reputation could have a material adverse effect on our financial condition and results of operations.

AExtreme weather conditions, natural ~~disaster, especially in California,~~disasters, rising sea levels, acts of war or terrorism, civil unrest, public health issues, or other adverse external events could harm our business.

The potential impacts of extreme weather conditions, natural disasters and rising sea levels, could impact our operations as well as those of our customers and third party vendors upon which we rely. Our ~~Bank’s~~Bank is based in San Diego, California, and approximately ~~72.2%~~45.4% of our mortgage loan portfolio was secured by real estate located in California at June 30, ~~2019.~~2022. In addition, some of our computer systems that operate our internet websites and their back-up systems are located in San Diego, California. Historically, California has been vulnerable to natural disasters. Therefore, we are susceptible to the risks of natural disasters, such as earthquakes, wildfires, floods and ~~mudslides.~~mudslides, the nature and magnitude of which cannot be predicted and may be exacerbated by global climate change. Natural disasters could harm our operations directly through interference with communications, including the interruption or loss of our websites, which would prevent us from gathering deposits, originating loans and leases and processing and controlling our flow of business, as well as through the destruction of facilities and our operational, financial and management information systems. A natural disaster or recurring power outages may also impair the value of our largest class of assets, our loan and lease portfolio, which is comprised substantially of real estate loans. ~~Uninsured~~Losses from disasters for which borrowers are uninsured or under-insured ~~disasters~~ may reduce borrowers’ ability to repay mortgage loans. ~~Disasters may also reduce~~Natural disasters, acts of war or terrorism, civil unrest, public health issues, or other adverse external events could each negatively impact our business operations or the ~~value~~stability of our deposit base, cause significant property damage, adversely impact the ~~real estate~~values of collateral securing our loans ~~impairing~~and/or interrupt our ~~ability~~borrowers’ abilities to ~~recover on defaulted loans through foreclosure~~conduct their business in a manner

to support their debt obligations, which could result in losses and ~~making it more likely that we would suffer losses on defaulted loans.~~ increased provisions for credit losses. Although we have implemented several back-up systems and protections (and maintain standard business interruption insurance), these measures may not protect us fully from the effects of a natural ~~disaster.~~disaster, acts of war or terrorism, civil unrest, public health issues, or other adverse external events. The occurrence of natural disasters, particularly in California, could have a material adverse effect on our business, prospects, financial condition and results of operations.

Increased regulation related to Environmental, Social, and Governance factors could negatively affect our operating results and could increase our operating expenses and those of our customers.

There is increased public awareness and concern by governmental organizations on a variety of environmental, social, and sustainability matters,including climate change. This increased awareness may include more prescriptive reporting of environmental, social, and governance metrics, and other compliance requirements. Further legislation and regulatory requirements could increase the operating expenses of, or otherwise adversely impact, us and our customers.To the extent that the we or our customers experience increases in costs, reductions in the value of assets, constraints on operations or similar concerns driven by changes in regulation relating to climate change, it could have an adverse effect on our business, prospects, financial condition and results of operations.

Our success depends in large part on the continuing efforts of a few individuals. If we are unable to retain these key personnel or attract, hire and retain others to oversee and manage our company, our business could suffer.

Our success depends substantially on the skill and abilities of our senior management team, including our Chief Executive Officer and President, Gregory Garrabrants, ~~our Chief Financial Officer, Andrew J. Micheletti,~~ and other employees that perform multiple functions that might otherwise be performed by separate individuals at larger banks. The loss of the services of any of these individuals or other key employees, whether through termination of employment, disability or otherwise, could have a material adverse effect on our business. In addition, our ability to grow and manage our growth depends on our ability to continue to identify, attract, hire, train, retain and motivate highly skilled executive, technical, managerial, sales, marketing, customer service and professional personnel. The implementation of our business plan and our future success will depend on such qualified personnel. Competition for ~~such~~ employees is intense in many areas of the financial services industry, and there is a risk that we will not be able to successfully attract, assimilate or retain sufficiently qualified personnel. If we fail to attract and retain the necessary personnel, our business, prospects, financial condition and results of operations could be adversely affected.

We are exposed to risk of environmental liability with respect to properties to which we take title.

In the course of our business, we may foreclose and take title to real estate, including commercial real estate, and could be subject to environmental liabilities with respect to those properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination or may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. If we become subject to significant environmental liabilities, our business, prospects, financial condition and results of operations could be adversely affected.

Technology Risks in our Online Business

We depend on third-party service providers for our core banking and securities transactions technology, and interruptions in or terminations of their services could materially impair the quality of our services.

We rely substantially upon third-party service providers for our core banking technology and to protect us from bank system failures or ~~disruptions.~~disruptions, including with respect to securities technology at our clearing broker-dealer. This reliance may mean that we will not be able to resolve operational problems internally or on a timely basis, which could lead to customer dissatisfaction or long-term disruption of our operations. Our operations also depend upon our ability to replace a third-party service provider if it experiences difficulties that interrupt operations or if an essential third-party service terminates. If these service arrangements are terminated for any reason without an immediately available substitute arrangement, our operations may be severely interrupted or delayed. If such interruption or delay were to continue for a substantial period of time, our business, prospects, financial condition and results of operations could be adversely affected.

Privacy concerns relating to our technology could damage our reputation and deter current and potential customers from using our products and services.

Generally speaking, concerns have been expressed about whether smartphone and internet-based products and services compromise the privacy of users and others. Concerns about our practices with regard to the collection, use, disclosure or security of personal information of our customers or other privacy related matters, even if unfounded, could damage our reputation and results of operations. While we strive to comply with all applicable data protection laws and regulations, as well as our own posted privacy policies, any failure or perceived failure to comply may result in proceedings or actions against us by government entities or others, or could cause us to lose customers, which could potentially have an adverse effect on our business.

Misconduct by employees could also result in fraudulent, improper or unauthorized activities on behalf of clients or improper use of confidential personal information. The Company may not be able to prevent employee errors or misconduct, and the precautions the Company takes to detect this type of activity might not be effective in all cases. Employee errors or misconduct could subject the Company to civil claims for negligence or regulatory enforcement actions, including fines and restrictions on our business.

In addition, as nearly all of our products and services are smartphone and internet-based, the amount of data we store for our customers on our servers (including personal information) has been increasing and will continue to increase. Any systems failure or compromise of our security that results in the release of our customers’ data could seriously limit the adoption of our products and services, as well as harm our reputation and brand and, therefore, our business. We may also need to expend significant resources to protect against security breaches. System enhancements and updates may also create risks associated with implementing new systems and integrating them with existing ones. Due to the complexity and interconnectedness of information technology systems, the process of enhancing our layers of defense can itself create a risk of systems disruptions and security issues. In addition, addressing certain information security vulnerabilities, such as hardware-based vulnerabilities, may affect the performance of our information technology systems. The ability of our hardware and software providers to deliver patches and updates to mitigate vulnerabilities in a timely manner can introduce additional risks, particularly when a vulnerability is being actively exploited by threat actors.

The risk that these types of events could seriously harm our business is likely to increase as we add more customers and expand the number of smartphone and internet-based products and services we offer.

We have risks of systems failure and disruptions to operations.

The computer systems, internet connectivity and network infrastructure utilized by us and others could be vulnerable to unforeseen problems. This is true of both our internally developed systems and the systems of our third-party service providers. Our operations are dependent upon our ability to protect computer equipment against damage from fire, power loss, telecommunication failure or similar catastrophic events.

Any damage or failure that causes an interruption in our operations could adversely affect our business, prospects, financial condition and results of operations.

If our security measures are breached, or if our services are subject to cybersecurity attacks that degrade or deny the ability of customers to access our products and services, our products and services may be perceived as not being secure, customers may curtail or stop using our products and services, and we may incur significant legal and financial exposure.

Our products and services involve the storage and transmission of customers’ proprietary information, and security breaches could expose us to a risk of loss of this information, litigation, and potential liability. We employ cybersecurity measures that are designed to prevent, detect, and respond to cyberattacks, including management-level engagement and corporate governance, formalized risk management, advanced technical controls, incident response planning, frequent vulnerability testing, vendor management, intrusion monitoring, security awareness program, and partnerships with the appropriate government and law enforcement agencies. These procedures cannot, however, assure that we will be fully protected from a cybersecurity incident. Our security measures may be breached due to the actions of organized crime, hackers, terrorists, nation-states, activists and other outside parties, employee error, failure to follow security procedures, malfeasance, or otherwise and, as a result, an unauthorized party may obtain access to our data or our customers’ data. In addition, to access our products and services, our customers use personal computers, smartphones, tablets, and other mobile devices that are beyond our control environment. Additionally, outside parties may attempt to fraudulently induce employees or customers to disclose sensitive information in order to gain access to our data or our customers’ data. Other types of cybersecurity attacks may include computer viruses, malicious or destructive code, denial-of-service attacks, ransomware or ransom demands to not expose security vulnerabilities in the Company’s systems or the systems of third parties. Any such breach or unauthorized access could result in significant legal and financial exposure, damage to our reputation, and a loss of confidence in the security

of our products and services that could potentially have an adverse effect on our business. Because the techniques used to obtain unauthorized access, disable or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of our security occurs, including those of our third-party vendors, such as hacking or identity theft, ~~the market perception of the effectiveness~~it could cause serious negative consequences, including significant disruption of our operations, misappropriation of confidential information, or damage to computers or systems, and may result in violations of applicable privacy and other laws, financial loss and loss of confidence in our security measures ~~could be harmed and, as~~. As a result, we could lose customers, suffer employee productivity losses, incur technology replacement and incident response costs, be subject to additional regulatory scrutiny, ~~could~~and be subject us to civil litigation and possible financial liability, any of which may have a material adverse effect on our business, financial condition and results of operations.

~~Our~~We are heavily reliant on technology, and a failure in effectively implementing technology initiatives or anticipating future technology needs or demands could adversely affect our business ~~depends~~or financial results.

We depend on ~~continued and unimpeded access~~technology to ~~the internet by us and~~deliver our ~~customers. Internet access providers may be able to block, degrade, or charge for access to our website, which could lead to additional expenses and the loss of customers.~~

~~Our~~ products and services ~~depend~~and to conduct our business and operations. To remain technologically competitive and operationally efficient, we invest in system upgrades, new solutions, and other technology initiatives. Many of these initiatives take a significant amount of time to develop and implement, are tied to critical systems, and require substantial financial, human, and other resources. Although we take steps to mitigate the risks and uncertainties associated with these initiatives, no assurance can be provided that they will be implemented on time, within budget, or without negative financial, operational, or customer impact or that, once implemented, they will perform as we or our customers expect. We also may not succeed in anticipating or keeping pace with future technology needs, the technology demands of customers, or the competitive landscape for technology. If we are not able to anticipate and keep pace with existing and future technology needs, our business, financial results, or reputation could be negatively impacted.

Risks Associated with our Common Stock

The market price of our common stock may be volatile.

Stock price volatility may make it more difficult for our stockholders to resell their common stock when desired. Our common stock price may fluctuate significantly due to a variety of factors that include the following:

•actual or expected variations in quarterly results of operations;

•recommendations by securities analysts;

•operating and stock price performance of comparable companies, as deemed by investors;

•news reports relating to trends, concerns, and other issues in the financial services industry;

•perceptions in the marketplace about our company or competitors;

•new technology used, or services offered, by competitors;

•significant acquisitions or business combinations, strategic partnerships, joint ventures, or capital commitments by, or involving, our Company or competitors;

•failure to integrate acquisitions or realize expected benefits from acquisitions;

•changes in government regulations; and

•geopolitical conditions, such as acts or threats of terrorism or military action.

General market fluctuations; industry factors; political conditions; and general economic conditions and events, such as economic slowdowns, recessions, interest rate changes, or credit loss trends, could also cause our common stock price to decrease regardless of operating results.

Provisions in our Certificate of Incorporation, By-laws and Delaware laws might discourage, delay or prevent a change of control of our company or changes in our management and, therefore, depress the trading price of our common stock.

Provisions of our Certification of Incorporation, by-laws and Delaware laws may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions include:

•supermajority voting provisions providing that certain sections of our Certificate of Incorporation and our By-laws may not be amended or repealed by our stockholders without the affirmative vote of the holders of at least 75% of the voting power, and requiring the affirmative vote of the holders of at least 75% of the voting power to remove a director or directors and only for cause;

•our classified Board of Directors, which may tend to discourage a third-party from making a tender offer or otherwise attempting to obtain control of us since the classification of our Board of Directors generally increases the difficulty of replacing a majority of directors;

•advance notice provisions requiring stockholders seeking to nominate candidates to be elected as directors at an annual meeting or to bring business before an annual meeting to comply with the written procedure specified in our By-laws;

•the inability of stockholders to act by written consent or to call special meetings;

•the ability of our ~~customers~~Board of Directors to ~~access~~ make, alter or repeal our by-laws;

•the ~~internet~~ability of our Board of Directors to designate the terms of and issue new series of preferred stock without stockholder approval;

•the additional shares of authorized common stock and preferred stock available for issuance under our ~~website. Currently, this access is provided~~Certificate of Incorporation, which could be issued at such times, under such circumstances and with such terms and conditions as to impede a change in control.

In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an interested stockholder for a period of three years following the date on which the stockholder became an interested stockholder, unless such transactions are approved by ~~companies~~our Board of Directors. The existence of the foregoing provisions and anti-takeover measures could limit the price that ~~have significant market power~~investors might be willing to pay in the ~~broadband~~future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

General Risk Factors

Our acquisitions involve integration and ~~internet access marketplace,~~other risks.

From time to time we undertake acquisitions of assets, deposits, lines of business and other companies consistent with our operating and growth strategies. Acquisitions generally involve a number of risks and challenges, including ~~incumbent telephone companies, cable companies and mobile communications companies. Some of these providers have the~~our ability to ~~take measures that could degrade, disrupt, or increase~~integrate the ~~cost~~acquired operations and the associated internal controls and regulatory functions into our current operations, our ability to retain key personnel of ~~customer access~~the acquired operations, our ability to ~~our products~~limit the outflow of acquired deposits and services by restricting or prohibiting the use of their infrastructure to access our website or by charging fees to us or our customers to provide access to our website. Such interference could result in a loss of existing customers and/or increased costssuccessfully retain and ~~could impair~~manage acquired assets, our ability to attract new customers ~~which~~and generate new assets in areas not previously served, and the possible assumption of risks and liabilities related to litigation or regulatory proceedings involving the acquired operations. Additionally, no assurance can be given that the operation of acquisitions would not adversely affect our existing profitability, that we would be able to achieve results in the future similar to those achieved by the acquired operations, that we would be able to compete effectively in the markets served by the acquired operations, or that we would be able to manage any growth resulting from the transaction effectively. We also face the risk that the anticipated benefits of any acquisition may not be realized fully or at all, or within the time period expected.

As a public company, we face the risk of shareholder lawsuits and other related or unrelated litigation, particularly if we experience declines in the price of our common stock.

We are subject to a variety of litigation pertaining to fiduciary and other claims and legal proceedings. Currently, there are certain legal proceedings pending against us in the ordinary course of business. While the outcome of any legal proceeding is inherently uncertain, we believe any liabilities arising from pending legal matters have been adequately accrued for based on the probability of a charge. However, if actual results differ from our expectations, it could have a material adverse effect on the Company's financial condition, results of operations, or cash flows. For a detailed discussion on current legal proceedings, see Item 3 — “Legal Proceedings.”

Our controls and procedures may fail or be circumvented.

We regularly review and update our internal controls, disclosure controls and procedures, compliance monitoring activities and corporate governance policies and procedures. Any system of controls, however well-designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, ~~financial condition and~~ results of ~~operations.~~operations, reputation and financial condition. In addition, if we identify material weaknesses or significant deficiencies in our internal control over financial reporting or are required to restate our financial statements, we could be required to implement expensive and time-consuming remedial measures. We could lose investor confidence in the accuracy and completeness of our financial reports and potentially subject us to litigation. Any material weaknesses or significant deficiencies in our internal control over financial reporting or restatement of our financial statements could have a material adverse effect on our business, results of operations, reputation, and financial condition.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our principal offices are located at 9205 West Russell Road, ~~STE~~Suite 400, Las Vegas, NV ~~89148, both our~~89148. Our Banking and Securities segments conduct business at this location and our telephone number is (858) 649-2218. We have additional office space located at 4350 La Jolla Village Drive, Suite 140, San Diego, California 92122. Our offices in Las Vegas consist of a total of approximately ~~27,100~~30,000 square feet under leases that expire ~~December 31, 2023~~September 30, 2027 and our San Diego facilities consist of a total of approximately ~~174,000~~182,000 square feet under leases that expire June 30, 2030.

ITEM 3. LEGAL PROCEEDINGS

We may from time to time become a party to other claims or litigation that arise in the ordinary course of business, such as claims to enforce liens, claims involving the origination and servicing of loans, and other issues related to the business of the Bank. None of such matters are expected to have a material adverse effect on the Company’s financial condition, results of operations or business. For additional information on legal proceedings, refer to Note 18 - “Commitments, Contingencies, and Off-Balance-Sheet Activities.”

~~Litigation.~~ On October 15, 2015, the Company, its Chief Executive Officer and its Chief Financial Officer were named defendants in a putative class action lawsuit styled Golden v. BofI Holding, Inc., et al, and brought in United States District Court for the Southern District of California (the “Golden Case”). On November 3, 2015, the Company, its Chief Executive Officer and its Chief Financial Officer were named defendants in a second putative class action lawsuit styled Hazan v. BofI Holding, Inc., et

al, and also brought in the United States District Court for the Southern District of California (the “Hazan Case”). On February 1, 2016, the Golden Case and the Hazan Case were consolidated as In re BofI Holding, Inc. Securities Litigation, Case #: 3:15-cv-02324-GPC-KSC (the “Class Action”), and the Houston Municipal Employees Pension System was appointed lead plaintiff. The plaintiffs allege that the Company and other named defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by failing to disclose wrongful conduct that was alleged in a complaint filed in connection with a wrongful termination of employment lawsuit filed on October 13, 2015 (the “Employment Matter”) and that as a result the Company’s statements regarding its internal controls, as well as portions of its financial statements, were false and misleading. On March 21, 2018, the Court entered a final order dismissing the Class Action with prejudice. Subsequently, the plaintiff filed a notice of appeal and opening brief and the Company has filed its answering brief.

On April 3, 2017, the Company, its Chief Executive Officer and its Chief Financial Officer were named defendants in a putative class action lawsuit styled Mandalevy v. BofI Holding, Inc., et al, and brought in United States District Court for the Southern District of California (the “Mandalevy Case”). The Mandalevy Case seeks monetary damages and other relief on behalf of a putative class that has not been certified by the Court. The complaint in the Mandalevy Case (the “Mandalevy Complaint”) alleges a class period that differs from that alleged in the First Class Action, and that the Company and other named defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by failing to disclose wrongful conduct that was alleged in a March 2017 media article. The Mandalevy Case has not been consolidated into the First Class Action. On December 7, 2018, the Court entered a final order granting the defendants’ motion and dismissing the Mandalevy Case with prejudice. Subsequently, the plaintiff filed a notice of appeal and opening brief and the Company has filed its answering brief.

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

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

The United States District Court for the Southern District of California ordered the four above-referenced derivative actions pending before it to be consolidated and appointed lead counsel in the consolidated action. On June 7, 2018, the Court entered an order granting defendant’s motion for judgment on the pleadings, but giving the plaintiffs limited leave to amend by June 28, 2018. The plaintiffs failed to file an amended complaint, and instead plaintiffs filed on June 28, 2018, a motion to stay the case pending resolution of the securities class action and Employment Matter. On August 10, 2018, defendants filed an opposition to plaintiffs’ motion. On September 11, 2018, the plaintiffs filed a second amended complaint. On October 16, 2018, defendants filed a motion to dismiss the second amended complaint. On May 23, 2019, the Court dismissed the second amended complaint with prejudice. On June 20, 2019, the plaintiff filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit.

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

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

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

Our future performance will depend on many factors: changes in interest rates, competition for deposits and quality loans, the credit performance of our assets, regulatory actions, strategic transactions, and our ability to improve operating efficiencies. See “Item 1A. Risk Factors.”

MERGERS AND ACQUISITIONS

From time to time we undertake acquisitions or similar transactions consistent with our Company’s operating and growth strategies. ~~We completed two business~~On August 2, 2021, we acquired certain assets and liabilities of E*TRADE Advisor Services as described below. There were no other acquisitions or similar transactions undertaken during fiscal years 2021 and ~~two asset acquisitions during the fiscal year ended June 30, 2019 and one business acquisition during the fiscal year ended June 30, 2018.~~2020.

~~MWABank deposit~~E*TRADE Advisor Services acquisition. On March 15, 2019, the Bank closed the deposit assumption agreement with MWA Bank and acquired approximately $173 million of deposits, including approximately $151 million of checking, savings and money market accounts and $22 million million of time deposits, from MWABank. Axos did not acquire any assets, employees or branches in this transaction. The Bank received cash equal to the book value of the deposit liabilities.

~~WiseBanyan~~. On February 26, 2019 the Company’s subsidiary, Axos Securities, LLC, had completed the acquisition of WiseBanyan Holding, Inc. and its subsidiaries (collectively “WiseBanyan”). Headquartered in Las Vegas, Nevada, WiseBanyan is a provider of personal financial and investment management services through a proprietary technology platform. WiseBanyan currently serves approximately 24,000 clients with approximately $150 million of assets under management. The Company paid $3.2 million in cash to acquire the assets of WiseBanyan and recorded $2.7 million in intangible assets.The Company purchased the whole WiseBanyan business and has the entire voting interest. Goodwill is not expected to be deducted for tax purposes

~~COR Securities Holdings.~~ ~~On January 28, 2019 (“Acquisition Date”),~~August 2, 2021 Axos Clearing, LLC, acquired certain assets and ~~Axos Clarity MergeCo., Inc. completed the acquisition~~liabilities of ~~COR Securities Holdings Inc.(“COR Securities”~~E*TRADE Advisor Services (“EAS”), the ~~parent company~~registered investment advisor custody business of ~~COR Clearing LLC~~Morgan Stanley. This business was rebranded as Axos Advisors Services (“~~COR Clearing”~~AAS”)~~, pursuant~~. AAS adds incremental fee income, a turnkey technology platform used by independent registered investment advisors for trading and custody services, and low-cost deposits that can be used to ~~the terms~~generate fee income from other bank partners or to fund loan growth at Axos Bank. The purchase price of ~~the Agreement and Plan~~$54.8 million consisted entirely of ~~Merger, dated as of September 28, 2018 (the “Merger Agreement”).~~

Headquartered in Omaha, Nebraska, COR Clearing is a full-service correspondent clearing firm for independent broker-dealers. Established as a part of Mutual of Omaha Insurance Company and spun off as Legent Clearing in 2002, COR Clearing provides clearing, settlement, custody, and securities and margin lending to more than sixty introducing broker-dealers and 90,000 customers. The total cash consideration of approximately $80.9 million was funded with existing capital. The Company issued subordinated notes totaling $7.5 million to the principal stockholders of COR Securities in an equal principal amount, with a maturity of 15 months, to serve as the sole source of payment of indemnification obligations of the principal stakeholders of COR Securities under the Merger Agreement.paid upon acquisition and working capital adjustments.

The acquisition ~~of COR Securities~~ is ~~being~~ accounted for as a business combination ~~using~~under the acquisition method of ~~accounting~~accounting. Accordingly, tangible and ~~accordingly,~~intangible assets acquired (and liabilities ~~assumed, and consideration paid~~assumed) are recorded at their estimated fair values ~~on the Acquisition Date. The Company recorded goodwill for a provisional amount of $34.9 million and an additional $20.1 million in intangible assets~~ as of the Acquisition Date. The estimated fair values of the acquired assets and assumed liabilities are subject to refinement as additional information relative to closing date fair values becomes available. Any subsequent measurement period adjustments to the fair values of acquired assets and liabilities assumed, identifiable intangible assets, or other purchase accounting adjustments will result in adjustments to goodwill no later than within the first 12 months following the closing date of acquisition. ~~Included in the professional services line of the statement of income the Company recognized $0.4 million in transaction costs.~~

The acquisition will enable the Company to expand its banking business to a new customer base through independent broker-dealers and consumer account relationships, scale entry into wealth management securities custody through technology-driven platforms, and increase and diversify fee revenue, all of which will improve key operating metrics. The goodwill recognized results from the expected synergies and potential earnings from this combination.

~~Nationwide Bank deposit acquisition~~. On November 16, 2018, the Bank completed the acquisition of substantially all of Nationwide Bank’s (“Nationwide”) deposits at the time of closing, adding $2.4 billion in deposits, including $661.4 million in checking, savings and money market accounts and $1.7 billion in time deposit accounts. The Bank received cash for the deposit balances transferred less a premium of $13.5 million, recorded in intangibles, commensurate with the fair market value of the deposits purchased.

~~Bankruptcy trustee and fiduciary services business of Epiq Systems, Inc~~. On April 4, 2018, the Company completed the acquisition of the bankruptcy trustee and fiduciary services business of Epiq Systems, Inc. (“Epiq”). The assets acquired by the Company include comprehensive software solutions, trustee customer relationships, trade name, accounts receivable and fixed assets. The business provides specialized software and consulting services to Chapter 7 bankruptcy and non-Chapter 7 trustees and fiduciaries in all fifty states. This business is expected to generate fee income from bank partners and bankruptcy cases, as well as opportunities to source low cost deposits. No deposits were acquired as part of the transaction.

Under the terms of the purchase agreement, the aggregate purchase price included the payment of $70.0 million in cash. The Company acquired assets with approximate fair values of $32.7 million of intangible assets, including customer relationships, developed technologies, a covenant not to compete and the trade name, and $1.6 million of accounts receivable and fixed assets, resulting in $35.7 million of goodwill. Transaction-related expenses were de minimis.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements and the notes thereto, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions based upon historical experience and various factors and circumstances. We believe that our estimates and assumptions are reasonable under the circumstances. However, actual results may differ significantly from these estimates and assumptions that could have a material effect on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods.

Critical accounting policies and estimates are those that we consider most important to the portrayal of our financial condition and results of operations because they require our most difficult judgments, often as a result of the need to make estimates that are inherently uncertain. We have identified critical accounting policies and estimates below. In addition, these critical accounting policies and estimates are included in Note 1 - “Summary of Significant Accounting Policies”.

Securities. ~~We classify securities~~There were no changes in the processes or methods of determining estimates affecting Securities in the year end June 30, 2022 as ~~either trading, available-for-sale or held-to-maturity. Trading securities are~~compared to the year ended June 30, 2021.

For further information on Securities, refer to Note 1 - “Summary of Significant Accounting Policies” and Note 4 - “Securities”.

Allowance for Credit Losses. The Company maintains an allowance for credit loss for the Company’s held-for-investment loan portfolio, excluding those ~~securities for which we have elected fair value accounting. Trading securities are recorded~~loans measured at fair value in accordance with ~~changes in fair value recorded in earnings each period. Securities available-for-sale are reported at estimated fair value, with unrealized gains and~~applicable accounting standards. The allowance for credit losses net of the related tax effects, excluded from operations and reported as a separate component of accumulated other comprehensive income or loss. The fair values of securities traded in active markets are obtained from market quotes. If quoted prices in active markets are not available, we determine the fair values by utilizing industry-standard tools to calculate the net present valuereflects management’s evaluation of the expected ~~cash flows available~~life-time credit losses related to the ~~securities. For securities other than non-agency RMBS, we use observable market participant inputs~~amortized cost basis of loans and ~~categorize these securities as Level II~~net investment in ~~determining fair value. For non-agency RMBS securities, we use a level III fair value model approach. To determine~~leases on the ~~performance~~balance sheet.

The assessment of the adequacy of our allowance for credit losses is based upon quantitative and qualitative factors, including levels and trends of past due and nonaccrual accounts, loss history and changes in the volume and mix of loans and collateral values. Charge-offs against the allowance for credit losses are taken on loans and leases where management determines the collection of principal is unlikely. Recoveries made on loans that have been charged off are credited to the allowance for credit losses.

The calculation of the allowance for credit losses is a critical accounting estimate. The Company’s process entails segregating the portfolio according to products with similar risk characteristics; applying a quantitative model which leverages both a probability of default (“PD”) and a loss given default (“LGD”) applied to historic and third-party economic data, and then overlaying these results with a qualitative assessment focused on limitations of the model and the underlying ~~mortgage loan~~data.

Variables considered in the quantitative assessment include unemployment and interest rate risk which impact the default rate of the risk pools ~~we consider where appropriate borrower prepayments, defaults,~~ and ~~loss severities~~the underlying collateral. The quantitative results are influenced by the weighting of third-party macroeconomic scenarios across the benign to adverse spectrum for each segment with the baseline economic scenario representing the consensus most likely in the third party forecast. The weighting of scenarios is subject to periodic review and may be adjusted based on ~~a number~~the Company’s view of ~~macroeconomic factors, including housing price changes, unemployment rates, interest rates and borrower attributes such as credit score and loan documentation at the time~~current economic conditions. Adjustment of origination. We input for each security our projections of monthly default rates, loss severity rates and voluntary prepayment rates for the underlying mortgages for the remaining life of the security to determine the expected cash flows. The projections of default rates are derived by the Companyscenario weighting away from the ~~historic default rate observed in~~baseline scenario to more severe scenarios would increase the ~~pool~~allowance for credit losses on the Company’s held-for-investment loan portfolio. Economic conditions that impacted management’s assessment of ~~loans collateralizing~~scenario weightings and the security, increased by (or decreased by) the forecasted increase or decrease in the national unemployment rate as well as the forecasted increase or decrease in the national home price appreciation (HPA) index. The projections of loss severity rates are derived by the Company from the historic loss severity rate observed in the pool of loans, increased by (or decreased by) the forecasted decrease or increase in the HPA index. To determine the discount rates used to compute the present value of the expected cash flows for these non-agency RMBS securities, we separate the securities by the borrower characteristics in the

underlying pool. For example, non-agency RMBS “Prime” securities generally have borrowers with higher FICO scores and better documentation of income. “Alt-A” securities generally have borrowers with lower FICO and less documentation of income. “Pay-option ARMs” are Alt-A securities with borrowers that tend to pay the least amount of principal (or increase their loan balance through negative amortization). Separate discount rates are calculated for Prime, Alt-A and Pay-option ARM non-agency RMBS securities using market-participant assumptions for risk, capital and return on equity.

~~At each reporting date, we monitor our available-for-sale and held-to-maturity securities for other-than-temporary impairment. The Company measures its debt securities in an unrealized loss position~~economic forecasts at the end of the reporting period for other-than-temporary impairment by comparing the present value of the cash flows currently expected to be collected from the security with its amortized cost basis. If the calculated present value is lower than the amortized cost, the difference is the credit component of an other-than-temporary impairment of its debt securities. The excess of the present value over the fair value of the security (if any) is the noncredit component of the impairment, only if the Company does not intend to sell the securityfiscal year 2022 included rising interest rates, increased inflation, continued supply chain constraints and will not be required to sell the security before recovery of its amortized cost basis. The credit component of the other-than-temporary-impairment is recorded as a loss in earnings and the noncredit component is recorded as a charge to other comprehensive income, net of the related income tax benefit.increased geopolitical unrest.

For non-agency RMBS we determine the cash flow expected to be collected and calculate the present value for purposes of testing for other-than-temporary impairment, by utilizing the same industry-standard tool and the same cash flows as those calculated for fair values (discussed above). We compute cash flows based upon the underlying mortgage loan pools and our estimates of prepayments, defaults, and loss severities. We input our projections for the underlying mortgages for the remaining life of the security to determine the expected cash flows. The discount rates used to compute the present value of the expected cash flows for purposes of testing for the credit component of the other-than-temporary impairment are different from those used to calculate fair value and are either the implicit rate calculated in each of our securities at acquisition or the last accounting yield (ASC Topic 325-40-35). We calculate the implicit rate at acquisition basedfurther information on the contractual terms of the security, considering scheduled payments (and minimum payments in the case of pay-option ARMs) without prepayment assumptions. We use this discount rate in the industry-standard model to calculate the present value of the cash flows for purposes of measuring the credit component of an other-than-temporary impairment of our debt securities.

Allowance for ~~Loan and Lease~~Credit Losses,~~. The allowance for loan and lease losses is maintained at a level estimated~~ refer to ~~provide for probable incurred losses in the loan and lease portfolio. Management determines the adequacy~~Note 1 - “Summary of ~~the allowance based~~

on reviews of individual loans and leases and pools of loans, recent loss experience, current economic conditions, the risk characteristics of the various categories of loans and other pertinent factors. This evaluation is inherently subjective and requires estimates that are susceptible to significant revision as more information becomes available. The allowance is increased by the provision for loan and lease losses, which is reduced by charge-offs and recoveries of loans previously charged-off. Allocations of the allowance may be made for specific loans but the entire allowance is available for any loan that, in management’s judgment, may be uncollectible or impaired.

The allowance for loan and lease losses includes general reserves and may include specific reserves. Specific reserves may be provided for impaired loans. All other impaired loans are written down through charge-offs to their realizable value and no specific or general reserve is provided. A loan is measured for impairment generally two different ways. If the loan is primarily dependent upon the borrower’s ability to make payments, then impairment is calculated by comparing the present value of the expected future payments discounted at the effective loan rate to the carrying value of the loan. If the loan is collateral dependent, the net proceeds from the sale of the collateral is compared to the carrying value of the loan. If the calculated amount is less than the carrying value of the loan, the loan has impairment.

A general reserve is included in the allowance for loan and lease losses and is determined by adding the results of a quantitative and a qualitative analysis to all other loans not measured for impairment at the reporting date. The quantitative analysis determines the Bank’s actual annual historic charge-off rates and applies the average historic rates to the outstanding loan balances in each loan class. The qualitative analysis considers one or more of the following factors: changes in lending policies and procedures, changes in economic conditions, changes in the content of the portfolio, changes in lending management, changes in the volume of delinquency rates, changes to the scope of the loan review system, changes in the underlying collateral of the loans, changes in credit concentrations and any changes in the requirements to the credit loss calculations. A loss rate is estimated and applied to those loans affected by the qualitative factors. The following portfolio segments have been identified: single family secured mortgage, home equity secured mortgage, single family warehouse and other, multifamily secured mortgage, commercial real estate mortgage, recreational vehicles and auto secured, factoring, C&I and other.

~~Business Combinations.~~ Mergers and acquisitions are accounted for in accordance with ASC 805 “Business Combinations” using the acquisition method of accounting. Assets and liabilities acquired and assumed are generally recorded at their fair values as of the date of the transaction. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Significant ~~estimates and judgments are involved in the fair valuation and purchase price allocation process.~~Accounting Policies”.

Goodwill and Other Intangible Assets. ~~Goodwill represents the excess of the cost of an acquisition over the~~Estimates used to calculate fair value of a reporting unit change from year to year based on operating results, market conditions and other factors. Application of the ~~net assets acquired. Other~~goodwill impairment tests requires significant judgments, including estimation of future cash flows. As such, changes in assumptions underlying the valuation of goodwill and other intangible assets ~~represent purchased~~are part of the ordinary course of accounting for goodwill and other intangible assets.

For further information on Goodwill and Other Intangible Assets, refer to Note 1 - “Summary of Significant Accounting Policies”.

FINANCIAL HIGHLIGHTS

The following selected consolidated financial information should be read in conjunction with “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited consolidated financial statements and footnotes included elsewhere in this Annual Report on Form 10-K.


	At or for the Fiscal Years Ended June 30,
(Dollars in thousands, except per share amounts)	2022		2021		2020
Selected Balance Sheet Data:
Total assets	$	17,401,165	$	14,265,565	$	13,851,900
Loans, net of allowance for credit losses	14,091,061		11,414,814		10,631,349
Loans held for sale, carried at fair value	4,973		29,768		51,995
Loans held for sale, lower of cost or fair value	10,938		12,294		44,565
Allowance for credit losses	148,617		132,958		75,807
Securities—trading	1,758		1,983		105
Securities—available for sale	262,518		187,335		187,627

Securities borrowed	338,980		619,088		222,368
Customer, broker-dealer and clearing receivables	417,417		369,815		220,266
Total deposits	13,946,422		10,815,797		11,336,694

Advances from the FHLB	117,500		353,500		242,500
Borrowings, subordinated debentures and other borrowings	445,244		221,358		235,789
Securities loaned	474,400		728,988		255,945
Customer, broker-dealer and clearing payables	511,654		535,425		347,614
Total stockholders’ equity	1,642,973		1,400,936		1,230,846
Selected Income Statement Data:
Interest and dividend income	$	659,728	$	617,863	$	622,839
Interest expense	52,570		79,121		145,228
Net interest income	607,158		538,742		477,611
Provision for credit losses	18,500		23,750		42,200
Net interest income after provision for credit losses	588,658		514,992		435,411
Non-interest income	113,363		105,261		102,987
Non-interest expense	362,062		314,510		275,766
Income before income tax expense	339,959		305,743		262,632
Income tax expense	99,243		90,036		79,194
Net income	$	240,716	$	215,707	$	183,438
Net income attributable to common stock	$	240,716	$	215,518	$	183,129
Per Common Share Data:
Net income:
Basic	$	4.04	$	3.64	$	3.01
Diluted	$	3.97	$	3.56	$	2.98
Adjusted earnings per common share (Non-GAAP1)	$	4.23	$	3.68	$	3.10
Book value per common share	$	27.48	$	23.62	$	20.56
Tangible book value per common share (Non-GAAP1)	$	24.45	$	21.36	$	18.28
Weighted average number of common shares outstanding:
Basic	59,523,626		59,229,495		60,794,555
Diluted	60,610,954		60,519,611		61,437,635
Common shares outstanding at end of period	59,777,949		59,317,944		59,612,635


	At or for the Fiscal Years Ended June 30,
(Dollars in thousands, except per share amounts)	2022			2021			2020
Performance Ratios and Other Data:
Loan originations for investment	$	10,366,796		$	6,471,864		$	6,797,971
Loan originations for sale	$	656,487		$	1,608,700		$	1,601,579
Loan purchases	$	31,667		$	3,619		$	—
Return on average assets	1.57		%	1.52		%	1.53		%
Return on average common stockholders’ equity	15.61		%	16.51		%	15.65		%
Interest rate spread2	3.91		%	3.70		%	3.65		%
Net interest margin3	4.13		%	3.92		%	4.12		%
Net interest margin - Banking segment only3	4.36		%	4.11		%	4.19		%
Efficiency ratio4	50.25		%	48.84		%	47.50		%
Efficiency ratio - Banking segment only4	41.61		%	41.95		%	39.81		%
Capital Ratios:
Equity to assets at end of period	9.44		%	9.82		%	8.89		%
Axos Financial, Inc.:
Tier 1 leverage (core) capital to adjusted average assets	9.25		%	8.82		%	8.97		%
Common equity tier 1 capital (to risk-weighted assets)	9.86		%	11.36		%	11.22		%
Tier 1 capital (to risk-weighted assets)	9.86		%	11.36		%	11.27		%
Total capital (to risk-weighted assets)	12.73		%	13.78		%	12.64		%
Axos Bank:
Tier 1 leverage (core) capital to adjusted average assets	10.65		%	9.45		%	9.25		%
Common equity tier 1 capital (to risk-weighted assets)	11.24		%	12.28		%	11.79		%
Tier 1 capital (to risk-weighted assets)	11.24		%	12.28		%	11.79		%
Total capital (to risk-weighted assets)	12.01		%	13.21		%	12.62		%
Axos Clearing:
Net capital	$	38,915		$	35,950		$	34,022
Excess capital	$	32,665		$	27,904		$	29,450
Net capital as percentage of aggregate debit item	12.45		%	8.94		%	14.88		%
Net capital in excess of 5% aggregate debit item	$	23,290		$	15,836		$	22,593
Asset Quality Ratios:
Net annualized charge-offs (recoveries) to average loans outstanding5	0.02		%	0.12		%	0.23		%
Net annualized charge-offs (recoveries) to average loans outstanding excluding tax products5	0.02		%	0.07		%	0.08		%
Non-performing loans and leases to total loans	0.83		%	1.26		%	0.82		%
Non-performing assets to total assets	0.68		%	1.07		%	0.68		%
Allowance for credit losses - loans to total loans held for investment at end of period	1.04		%	1.15		%	0.71		%
Allowance for credit losses - loans to non-performing loans	125.74		%	91.57		%	86.20		%

1 See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Use of Non-GAAP Financial Measures.”

2 Interest rate spread represents the difference between the weighted average yield on interest-earning assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights. Intangible assets that have finite lives, such as core deposit intangibles, are amortized over their estimated useful lives and ~~subject to periodic impairment testing. Intangible assets (other than goodwill) are amortized to expense using accelerated or straight-line methods over their respective estimated useful lives.~~the weighted average rate paid on interest-bearing liabilities.

~~Goodwill~~3 Net interest margin represents net interest income as a percentage of average interest-earning assets.

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

5 Net charge-offs do not include any amounts transferred to loans held for sale.

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

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


	For the Fiscal Years Ended June 30,
	2022						2021						2020
(Dollars in thousands)	Average Balance1		Interest Income / Expense		Average Yields Earned / Rates Paid		Average Balance1		Interest Income / Expense		Average Yields Earned / Rates Paid		Average Balance1		Interest Income / Expense		Average Yields Earned / Rates Paid
Assets:
Loans2,3	$	12,576,873	$	626,628	4.98	%	$	11,332,020	$	584,410	5.16	%	$	10,149,867	$	582,748	5.74	%

Interest-earning deposits in other financial institutions	1,233,983		4,501		0.36	%	1,600,811		2,185		0.14	%	833,612		10,906		1.31	%
Investment securities	176,951		6,952		3.93	%	192,420		9,560		4.97	%	217,598		11,061		5.08	%
Securities borrowed and margin lending4	687,363		20,512		2.98	%	613,735		20,466		3.33	%	362,063		16,585		4.58	%
Stock of the regulatory agencies	21,844		1,135		5.20	%	20,588		1,242		6.03	%	28,776		1,539		5.35	%
Total interest-earning assets	14,697,014		$	659,728	4.49	%	13,759,574		$	617,863	4.49	%	11,591,916		$	622,839	5.37	%
Non-interest-earning assets	658,494						394,085						395,789
Total assets	$	15,355,508					$	14,153,659					$	11,987,705
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	6,773,321	$	20,053	0.30	%	$	7,204,698	$	29,031	0.40	%	$	4,844,700	$	66,883	1.38	%
Time deposits	1,226,774		13,567		1.11	%	1,825,795		31,498		1.73	%	2,482,151		60,033		2.42	%

Securities loaned	469,051		1,124		0.24	%	412,385		1,496		0.36	%	247,420		679		0.27	%
Advances from the FHLB	349,796		4,625		1.32	%	211,077		4,672		2.21	%	747,358		11,988		1.60	%
Borrowings, subordinated notes and debentures	302,454		13,201		4.36	%	340,699		12,424		3.65	%	103,652		5,645		5.45	%
Total interest-bearing liabilities	9,121,396		52,570		0.58	%	9,994,654		79,121		0.79	%	8,425,281		145,228		1.72	%
Non-interest-bearing demand deposits	3,927,195						2,182,009						1,990,005
Other non-interest-bearing liabilities	764,542						671,581						397,506
Stockholders’ equity	1,542,375						1,305,415						1,174,913
Total liabilities and stockholders’ equity	$	15,355,508					$	14,153,659					$	11,987,705
Net interest income			$	607,158					$	538,742					$	477,611
Interest rate spread5					3.91	%					3.70	%					3.65	%
Net interest margin6					4.13	%					3.92	%					4.12	%

1Average balances are obtained from daily data.

2 Loans includes loans held for sale, loan premiums, discounts and unearned fees.

3Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loan fee income is not significant. Also includes $26.4 million as of June 30, 2022, $27.2 million as of June 30, 2021and $28.0 million as of June 30, 2020 of loans that qualify for Community Reinvestment Act credit which are taxed at a reduced rate.

4Margin lending is the significant component of the asset titled customer, broker-dealer and clearing receivables on the audited condensed consolidated balance sheets.

5Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.

6Net interest margin represents net interest income as a percentage of average interest-earning assets.

RESULTS OF OPERATIONS

Our results of operations depend on our net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Our net interest income has increased as a result of the growth in our interest earning assets and is subject to ~~impairment testing~~competitive factors in online banking and other markets. Our net interest income is reduced by our estimate of credit loss provisions for our loan portfolio. We also earn non-interest income primarily from mortgage banking activities, banking products and service activity, our Securities Business, prepaid card fee income, prepayment fee income from multifamily and commercial borrowers who repay their loans before maturity and from gains on sales of other loans and investment securities. Losses on investment securities reduce non-interest income. The largest component of non-interest expense is salary and benefits, which is a function of the number of personnel, which increased to 1,335 full-time equivalent employees at June 30, 2022, from 1,165 full time employees at June 30, 2021. We are subject to federal and state income taxes, and our effective tax rates were 29.19%, 29.45% and 30.15% for the fiscal years ended June 30, 2022, 2021, and 2020, respectively. Other factors that affect our results of operations include expenses relating to data processing, advertising, depreciation, occupancy, professional services, and other miscellaneous expenses.

COMPARISON OF THE FISCAL YEARS ENDED JUNE 30, 2022 AND JUNE 30, 2021

Net Interest Income. The following table sets forth the effects of changing rates and volumes on our net interest income. Information is provided with respect to (i) effects on interest income and interest expense attributable to changes in volume (changes in volume multiplied by prior rate); and (ii) effects on interest income and interest expense attributable to changes in rate (changes in rate multiplied by prior volume). The change in interest due to both volume and rate has been allocated proportionally to both, based on their relative absolute values.


	Fiscal Year Ended June 30, 2022 vs 2021
	Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)
Increase (decrease) in interest income:
Loans	$	63,006	$	(20,788)	$	42,218

Interest-earning deposits in other financial institutions	(602)		2,918		2,316
Investment securities	(724)		(1,884)		(2,608)
Securities borrowed and margin lending	2,314		(2,268)		46
Stock of the regulatory agencies	72		(179)		(107)
Total increase (decrease) in interest income	$	64,066	$	(22,201)	$	41,865
Increase (decrease) in interest expense:
Interest-bearing demand and savings	$	(1,735)	$	(7,243)	$	(8,978)
Time deposits	(8,570)		(9,361)		(17,931)

Securities loaned	2,301		(2,348)		(47)
Advances from the FHLB	180		(552)		(372)
Other borrowings	(1,486)		2,263		777
Total increase (decrease) in interest expense	$	(9,310)	$	(17,241)	$	(26,551)

Interest Income. Interest income for the fiscal year ended June 30, 2022 totaled $659.7 million, an increase of $41.9 million, or 6.8%, compared to $617.9 million in interest income for the fiscal year ended June 30, 2021 primarily due to growth in volume of interest-earning assets from loan originations, mainly from commercial real estate and commercial & industrial lending, partially offset by reduced rates on interest-earning assets. Average interest-earning assets for the fiscal year ended June 30, 2022 increased by $937.4 million compared to the fiscal year ended June 30, 2021 primarily due to loan originations for investment which totaled $10.4 billion during the year ended June 30, 2022. Yields on loans decreased by 18 basis points to 4.98% for the fiscal year ended June 30, 2022, primarily due to declines in market interest rates. For the fiscal year ended June 30, 2022, the growth in average balances contributed additional interest income of $64.1 million, which was offset by a $22.2 million decrease in interest income due to declines in market interest rates. The average yield earned on our interest-earning assets was 4.49% for the fiscal year ended June 30, 2022, even compared to 4.49% in 2021.

Interest Expense. Interest expense totaled $52.6 million for the fiscal year ended June 30, 2022, a decrease of $26.6 million, or 33.6% compared to $79.1 million in interest expense during the fiscal year ended June 30, 2021, due primarily to a $1.7 billion increase in non-interest bearing deposits and decreased rates on deposits, as a result of the Federal Reserve’s decision to maintain the Fed Funds target rate near zero for most of the fiscal year. The average rate paid on all of our interest-bearing liabilities decreased to 0.58% for the fiscal year ended June 30, 2022 from 0.79% for the fiscal year ended June 30, 2021, due primarily to decreased rates on deposits. Average interest-bearing liabilities for the fiscal year ended June 30, 2022

decreased $873.3 million compared to fiscal 2021, offset by an increase in non-interest bearing deposits. The average rate on interest-bearing demand and savings deposits decreased to 0.30% from 0.40% due to decreases in prevailing deposit rates across the industry. The rates on borrowings, subordinated notes and debentures also increased to 4.36% from 3.65% due to rates in effect when borrowing for operational needs. The average rate on time deposits decreased to 1.11% for the fiscal year ended June 30, 2022 from 1.73% for the fiscal year ended June 30, 2021, due to higher rate maturing time deposits. The average non-interest-bearing demand deposits were $3,927.2 million for the fiscal year ended June 30, 2022, up from $2,182.0 million, representing an increase of $1,745.2 million.

See “Asset Quality and Allowance for Credit Losses - Loans” for discussion of our allowance for credit losses and the related loss provisions.

Non-interest Income. The following table sets forth information regarding our non-interest income:


	For the Fiscal Year Ended June 30,
(Dollars in thousands)	2022		2021









Prepayment penalty fee income	$	13,303	$	7,166
Gain on sale – other	165		491
Mortgage banking income	19,033		42,150
Advisory fee income	29,230		—
Broker-dealer fee income	22,880		26,317
Banking and service fees	28,752		29,137
Total non-interest income	$	113,363	$	105,261

Non-interest income totaled $113.4 million for the fiscal year ended June 30, 2022 compared to non-interest income of $105.3 million for fiscal 2021. The increase was primarily the result of a $29.2 million increase in Advisory fee income from custody and mutual fund fees earned by the newly acquired AAS division and increased levels of prepayment penalty fee income of $6.1 million, partially offset by a decrease of $23.1 million in mortgage banking income, mainly due to raising rates and a $3.4 million decrease in broker-dealer fee income. Mortgage banking income for fiscal 2022 included a net mortgage servicing rights adjustment of approximately $2.3 million due to expected higher interest rates and slower mortgage prepayments.

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


	For the Fiscal Year Ended June 30,
(Dollars in thousands)	2022		2021
Salaries and related costs	$	167,390	$	152,576
Data processing	50,159		40,719
Depreciation and amortization	24,596		24,124
Advertising and promotional	13,580		14,212
Occupancy and equipment	13,745		13,402
Professional services	22,482		22,241
Broker-dealer clearing charges	15,184		11,152
FDIC and regulator fees	11,823		10,603

General and administrative expenses	43,103		25,481
Total non-interest expense	$	362,062	$	314,510

Non-interest expense totaled $362.1 million for the fiscal year ended June 30, 2022, an increase of $47.6 million compared to fiscal 2021. Salaries and related costs increased $14.8 million, or 9.7%, in fiscal 2022, generally due to the addition of AAS and the expansion of Bank operations specifically in areas related to lending and deposits. Our full time staff increased to 1,335 from 1,165 or 14.6% between fiscal years ended June 30, 2022 and 2021.

Data processing increased $9.4 million, primarily due to enhancements to customer interfaces and the Bank’s core processing system.

Depreciation and amortization, increased $0.5 million primarily due to amortization of intangibles as a result of the AAS acquisition and depreciation on lending platform enhancements and infrastructure development.

Advertising and promotional expense decreased $0.6 million, primarily due to reductions in mortgage lead generation and deposit marketing costs.

Occupancy and equipment expense increased $0.3 million, primarily due to annual cost increases in our office space lease agreements and the addition of an assumed office space lease for our AAS employees.

Professional services, which include accounting and legal fees, increased $0.2 million in fiscal 2022 compared to 2021. The increase in professional services was primarily due to increased legal and consulting expenses.

Broker-dealer clearing charges increased $4.0 million, primarily attributable to the acquisition of AAS and increased clearing charges due to higher activity.

The Federal Deposit Insurance Corporation (“FDIC”) and regulator fees increased by $1.2 million in fiscal 2022 compared to fiscal 2021. The increase corresponds to growth in average liabilities at the ~~reporting unit level, which is conducted at least annually.~~ Bank and increased assessment rates during fiscal 2022.

General and administrative expenses increased by $17.6 million in fiscal 2022 compared to 2021. The increase was primarily due to an $11.0 million charge due largely to a one-time resolution of a contractual claim, a $5.3 million provision to the unfunded loan commitment liability and increased travel costs of $2.1 million.

Income Tax Expense. Income tax expense was $99.2 million for the fiscal year ended June 30, 2022 compared to $90.0 million for fiscal 2021. Our effective tax rates were 29.19% and 29.45% for the fiscal years ended June 30, 2022 and 2021, respectively.

The Company ~~performs impairment testing~~received federal and state tax credits for the years ended June 30, 2022 and 2021, respectively. These tax credits reduced the effective tax rate by approximately 0.44% and 0.59%, respectively.

SEGMENT RESULTS

The Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to the Company’s financial condition and operating results and management’s regular review of the operating results of those services. The Company operates through two operating segments: Banking Business and Securities Business. In order to reconcile the two segments to the consolidated totals, the Company includes parent-only activities and intercompany eliminations. The following tables present the operating results of the segments:


	Fiscal Year Ended June 30, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	597,833	$	17,580	$	(8,255)	$	607,158
Provision for credit losses	18,500		—		—		18,500
Non-interest income	60,881		64,069		(11,587)		113,363
Non-interest expense	274,079		84,014		3,969		362,062
Income (loss) before taxes	$	366,135	$	(2,365)	$	(23,811)	$	339,959


	Fiscal Year Ended June 30, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	527,760	$	18,746	$	(7,764)	$	538,742
Provision for credit losses	23,750		—		—		23,750
Non-interest income	79,150		27,627		(1,516)		105,261
Non-interest expense	254,596		48,095		11,819		314,510
Income (loss) before taxes	$	328,564	$	(1,722)	$	(21,099)	$	305,743

Banking Business

For the fiscal year ended June 30, 2022, we had pre-tax income of $366.1 million compared to pre-tax income of $328.6 million for the fiscal year ended June 30, 2021. For the fiscal year ended June 30, 2022, the increase in pre-tax income was primarily related to increased net interest income due in large part to growth in volume of interest-earning assets from loan originations, primarily from commercial real estate and commercial & industrial lending, a decline in rates of interest-bearing demand and savings deposits and time deposits, growth in non-interest bearing deposits and a decrease in provision for credit losses, partially offset by a decrease in mortgage banking and an increase in non-interest expense.

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


	Fiscal Year Ended
		June 30, 2022		June 30, 2021
Efficiency ratio		41.61	%	41.95	%
Return on average assets		1.64	%	1.76	%
Interest rate spread		4.18	%	3.92	%
Net interest margin		4.36	%	4.11	%

Our Banking segment’s net interest margin exceeds our consolidated net interest margin. Our consolidated net interest margin includes certain items that are not reflected in the calculation of our net interest margin within our Banking Business and reduce our consolidated net interest margin, such as the borrowing costs at the Company and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities in our Securities Business, including items related to securities financing operations.

The following table presents our Banking segment’s information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin:


	For the Fiscal Years Ended June 30,
	2022						2021
(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid		Average Balance1		Interest Income/Expense		Average Yields Earned/Rates Paid
Assets:
Loans2,3	$	12,539,502	$	624,501	4.98	%	$	11,287,008	$	581,504	5.15	%
Interest-earning deposits in other financial institutions	953,490		3,189		0.33	%	1,329,029		1,359		0.10	%
Investment securities3	198,637		7,410		3.73	%	221,213		10,166		4.60	%
Stock of the regulatory agencies, at cost	18,789		1,132		6.02	%	17,250		932		5.40	%
Total interest-earning assets	13,710,418		636,232		4.64	%	12,854,500		593,961		4.62	%
Non-interest-earning assets	296,228						172,712
Total Assets	$	14,006,646					$	13,027,212
Liabilities and Stockholder's Equity:
Interest-bearing demand and savings	$	6,843,840	$	20,207	0.30	%	$	7,324,855	$	29,626	0.40	%
Time deposits	1,226,774		13,567		1.11	%	1,825,795		31,498		1.73	%

Advances from the FHLB	349,796		4,625		1.32	%	211,077		4,672		2.21	%
Borrowings, subordinated notes and debentures	93		—		—	%	116,255		406		0.35	%
Total interest-bearing liabilities	$	8,420,503	$	38,399	0.46	%	$	9,477,982	$	66,202	0.70	%
Non-interest-bearing demand deposits	4,012,615						2,209,932
Other non-interest-bearing liabilities	143,841						121,545
Stockholder's equity	1,429,687						1,217,753
Total Liabilities and Stockholders' Equity	$	14,006,646					$	13,027,212
Net interest income			$	597,833					$	527,759
Interest rate spread4					4.18	%					3.92	%
Net interest margin5					4.36	%					4.11	%

1Average balances are obtained from daily data.

2Loans include loans held for sale, loan premiums and unearned fees.

3Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loans include average balances of $26.4 million and $27.2 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2022 and 2021 twelve-month periods, respectively.

4Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.

5Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.


	Fiscal Year Ended June 30, 2022 vs 2021
	Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)
Increase (decrease) in interest income:
Loans and leases	$	62,716	$	(19,719)	$	42,997

Interest-earning deposits in other financial institutions	(469)		2,299		1,830
Investment securities	(965)		(1,791)		(2,756)

Stock of the regulatory agencies	87		113		200
Total increase (decrease) in interest income	$	61,369	$	(19,098)	$	42,271
Increase (decrease) in interest expense:
Interest-bearing demand and savings	$	(1,959)	$	(7,460)	$	(9,419)
Time deposits	(8,570)		(9,361)		(17,931)

Advances from the FHLB	2,301		(2,348)		(47)

Other borrowings	(203)		(203)		(406)
Total increase (decrease) in interest expense	$	(8,431)	$	(19,372)	$	(27,803)

The Banking segment’s net interest income for the fiscal year ended June 30, 2022 totaled $597.8 million, an increase of 13.3%, compared to net interest income of $527.8 million for the fiscal year ended June 30, 2021. The growth of net interest income is primarily attributable to growth in volume of interest-earning assets from loan originations, primarily from commercial real estate and commercial & industrial lending, a decline in rates of interest-bearing demand and savings deposits and time deposits and growth in non-interest bearing deposits.

The Banking segment’s non-interest income decreased $18.2 million during the ~~third quarter~~fiscal year ended June 30, 2022 to $60.9 million from the $79.2 million for the fiscal year ended June 30, 2021. The decrease in non-interest income for the fiscal year ended June 30, 2022, was primarily the result of ~~each~~a decrease in mortgage banking income of $23.1 million driven by the increase in mortgage rates partially offset by an increase of $6.1 million in prepayment penalty fee income.

Non-interest expense totaled $274.1 million for the fiscal year ended June 30, 2022, an increase of $19.5 million compared to fiscal 2021. General and administrative expenses increased by $16.4 million primarily due to an $11.0 million charge due largely to a one-time resolution of a contractual claim and a $5.3 million provision to the unfunded loan commitment liability, an increase in advertising and promotional expense of $8.6 million primarily due to costs paid to our Securities Segment for non-interest bearing deposits, a $5.8 million increase in data processing expense for systems enhancements, partially offset by a decrease of $4.7 million in salaries and related costs.

Securities Business

For the fiscal year ended June 30, 2022, our Securities Business segment had a loss before taxes of $2.4 million compared to the loss before taxes of $1.7 million for the fiscal year ended June 30, 2021.

The following table provides our Securities Business operating results:


	For the Fiscal Year Ended June 30,
(Dollars in thousands)		2022		2021
Net interest income		$	17,580	$	18,746
Non-interest income		64,069		27,627
Non-interest expense		84,014		48,095
Income (Loss) before taxes		$	(2,365)	$	(1,722)

Net interest income for the fiscal year ended June 30, 2022 was $17.6 million compared to $18.7 million for the fiscal year ended June 30, 2021. The decrease was primarily a result of a decrease in the rates earned on securities borrowed and margin lending. In the Securities Business, interest is earned through margin loan balances, securities borrowed, and cash deposit balances. Interest expense is incurred from cash borrowed through bank lines and securities lending.

Non-interest income totaled $64.1 million for the fiscal year ended June 30, 2022, an increase of $36.4 million compared to the $27.6 million during the fiscal year ended June 30, 2021. The increase was primarily attributable to a $28.3 million increase related to the addition of AAS custody and mutual funds fees, an increase of $10.3 million in fees earned on FDIC insured bank deposits, partially offset by a decrease of $1.2 million in correspondent fees, and a decrease of $1.3 million of clearing and custodial related fees.

Non-interest expense was $84.0 million during the fiscal year ended June 30, 2022, an increase of $35.9 million compared to $48.1 million during the fiscal year ended June 30, 2021. The increase was primarily related to an increase of $16.9 million in salaries and related expenses related to staffing and the acquisition of AAS, an increase of $4.1 million depreciation and amortization expense, an increase of $4.0 million in broker-dealer clearing charges, an increase of $3.6 million in data processing, an increase of $2.7 million occupancy and equipment expense, an increase of $1.4 million advertising and promotional expense, and an increase of $1.4 million general and administrative expenses. The increases were primarily the result of the addition of AAS.

Selected information concerning Axos Clearing LLC follows as of or ~~when events or~~for the year ended:


	June 30,
(Dollars in thousands)	2022			2021
Compensation as a % of net revenue	38.0		%	32.4		%
FDIC insured program balances (end of period)	$	3,452,358		$	730,248
Customer margin balances (end of period)	$	285,894		$	327,148
Customer funds on deposit, including short credits (end of period)	$	372,112		$	322,153

Clearing:
Total tickets	1,236,292			2,053,362
Correspondents (end of period)	71			69

Securities lending:
Interest-earning assets – stock borrowed (end of period)	$	338,980		$	619,088
Interest-bearing liabilities – stock loaned (end of period)	$	474,400		$	728,988

COMPARISON OF THE FISCAL YEARS ENDED JUNE 30, 2021 AND JUNE 30, 2020

Net Interest Income. Net interest income totaled $538.7 million for the fiscal year ended June 30, 2021 compared to $477.6 million for the fiscal year ended June 30, 2020. The following table sets forth the effects of changing rates and volumes on our net interest income. Information is provided with respect to (i) effects on interest income and interest expense attributable to changes in ~~circumstances indicate~~volume (changes in volume multiplied by prior rate); and (ii) effects on interest income and interest

expense attributable to changes in rate (changes in rate multiplied by prior volume). The change in interest due to both volume and rate has been allocated proportionally to both, based on their relative absolute values.


	Fiscal Year Ended June 30, 2021 vs 2020
	Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)
Increase (decrease) in interest income:
Loan and Leases	$	63,934	$	(62,272)	$	1,662

Interest-earning deposits in other financial institutions	5,473		(14,194)		(8,721)
Investment securities	(1,265)		(236)		(1,501)
Securities borrowed and margin lending	9,287		(5,406)		3,881
Stock of the regulatory agencies	(476)		179		(297)
Total increase (decrease) in interest income	$	76,953	$	(81,929)	$	(4,976)
Increase (decrease) in interest expense:
Interest-bearing demand and savings	$	23,234	$	(61,086)	$	(37,852)
Time deposits	(13,730)		(14,805)		(28,535)

Securities loaned	544		273		817
Advances from the FHLB	(10,732)		3,416		(7,316)
Other borrowings	9,184		(2,405)		6,779
Total increase/(decrease) in interest expense	$	8,500	$	(74,607)	$	(66,107)

Interest Income. Interest income for the fiscal year ended June 30, 2021 totaled $617.9 million, a decrease of $5.0 million, or 0.8%, compared to $622.8 million in interest income for the fiscal year ended June 30, 2020 primarily due to reduced rates on interest-earning assets, ~~might~~partially offset by growth in volume of interest-earning assets from loan originations, primarily from commercial real estate and commercial & industrial lending. Average interest-earning assets for the fiscal year ended June 30, 2021 increased by $2,167.7 million compared to the fiscal year ended June 30, 2020 primarily due to loan originations for investment which totaled $7,304.4 million during the year ended June 30, 2021. Yields on loans decreased by 58 basis points to 5.16% for the fiscal year ended June 30, 2021, primarily due to declines in market interest rates. For the fiscal year ended June 30, 2021, the growth in average balances contributed additional interest income of $77.0 million, which was offset by a $81.9 million decrease in interest income due to declines in market interest rates. The average yield earned on our interest-earning assets decreased to 4.49% for the fiscal year ended June 30, 2021, down from 5.37% in 2020 primarily due to decreases in loan yields and rates earned on deposits in other financial institutions. As a result of the Federal Reserve’s decisions to maintain the Fed Funds target rate near zero, the rates earned on our adjustable-rate loans are generally at their floor and the rates on newly originated loans are lower than the average rate of the loan portfolio.

Interest Expense. Interest expense totaled $79.1 million for the fiscal year ended June 30, 2021, a decrease of $66.1 million, or 45.5% compared to $145.2 million in interest expense during the fiscal year ended June 30, 2020, due primarily to a $192.0 million increase in non-interest bearing deposits and decreased rates on deposits, as a result of the Federal Reserve’s decisions to maintain the Fed Funds target rate near zero throughout the year, partially offset by greater volume of deposits due to growth. The average rate paid on all of our interest-bearing liabilities decreased to 0.79% for the fiscal year ended June 30, 2021 from 1.72% for the fiscal year ended June 30, 2020, due primarily to decreased rates on deposits. Average interest-bearing liabilities for the fiscal year ended June 30, 2021 increased $1,569.4 million compared to fiscal 2020. The average rate on interest-bearing demand and savings deposits decreased to 0.40% from 1.38% due to decreases in prevailing deposit rates across the industry. The rates on borrowing, subordinated notes and debentures also decreased to 3.65% from 5.45% due primarily to the mix of borrowings. The average rate on time deposits increased to 1.73% for the fiscal year ended June 30, 2021 from 2.42% for the fiscal year ended June 30, 2020, due to higher rate maturing time deposits. The average non-interest-bearing demand deposits were $2,182.0 million for the fiscal year ended June 30, 2021, up from $1,990.0 million, representing an increase of $192.0 million.

Provision for Credit Losses. Provision for credit losses was $23.8 million for the fiscal year ended June 30, 2021 and $42.2 million for fiscal 2020. The decrease was due to the decrease in provisions associated with non-recurring Refund Advance loans and macroeconomic updates relating to COVID-19. The provisions are made to maintain our allowance for credit losses at levels which management believes to be ~~impaired. Based~~adequate. The assessment of the adequacy of our allowance for credit losses is based upon a number of quantitative and qualitative factors, including levels and trends of past due and nonaccrual loans, loss history and changes in the volume and mix of loans and collateral values.

See “Asset Quality and Allowance for Credit Losses - Loans” for discussion of our allowance for loan and lease losses and the related loss provisions.

Non-interest Income. The following table sets forth information regarding our non-interest income:


	For the Fiscal Year Ended June 30,
(Dollars in thousands)	2021		2020










Prepayment penalty fee income	$	7,166	$	5,993
Gain on sale-other	491		6,871
Mortgage banking income	42,150		20,646
Broker-dealer fee income	26,317		23,210
Banking and service fees	29,137		46,267
Total non-interest income	$	105,261	$	102,987

Through our agreement with H&R Block, Inc. (“H&R Block”) and its wholly-owned subsidiaries the Bank earned significant non-interest income by providing H&R Block-branded financial products and services. On July 1, 2020, the Bank received written notification from Emerald Financial Services, LLC (“EFS”), a subsidiary of H&R Block, terminating the Program Management Agreement (“PMA”) covering the Emerald Prepaid Mastercard®, Refund Transfer and Emerald Advance products, effective July 1, 2020. While the PMA has been terminated, the Bank continued to perform certain services under the PMA until the services were fully transitioned to another bank in December 2020. Historically, the primary non-interest income generating H&R Block products and services that lead to the increased banking and service fees are Emerald Prepaid Mastercard® (“EPC”) and Refund Transfer (“RT”).

Non-interest income totaled $105.3 million for the fiscal year ended June 30, 2021 compared to non-interest income of $103.0 million for fiscal 2020. The increase was primarily the result of an increase of $21.5 million in mortgage banking income, resulting from an increase in originations and sales of loans held-for-sale due to the decline in market interest rates, an increase of $3.1 million in broker-dealer fee income, and increased levels of prepayment penalty fee income by $1.2 million, partially offset by a decrease of $17.1 million in banking and service fees, primarily due to Emerald Prepaid Mastercard® and Refund Transfer products associated with H&R Block that did not recur in fiscal 2021, and a $6.4 million decrease in gain on sale-other, as certain sales of lottery receivables and sales of Refund Advance loans to H&R Block in fiscal 2020 did not recur in fiscal 2021. Banking and service fees includes H&R Block-branded product fees, deposit fees, fee income from prepaid card sponsors, and certain C&I loan fees. The primary non-interest income-generating H&R Block products and services that led to increased levels of banking and service fees in fiscal 2020 are EPC and RT. For the fiscal year ended June 30, 2021, EPC was $2.6 million compared to $7.8 million for fiscal 2020. For the fiscal year ended June 30, 2021, RT was $1.4 million compared to $11.5 million for fiscal 2020.

Included in gain on sale – other are sales of unsecured and secured consumer and business loans originated through introductions from our third-party partner relationships and sales of structured settlement annuity and state lottery receivables. We engage in the wholesale and retail purchase of state lottery prize and structured settlement annuity payments. These payments are high credit quality deferred payment receivables having a state lottery commission or investment grade (top two tiers) insurance company payor. The Bank originates contracts for the retail purchase of such payments and classifies these under the category of Other in the loan portfolio. Factoring yields are typically higher than mortgage loan rates. Typically, the gain received upon sale of these payment streams is greater than the gain received from an equivalent amount of mortgage loan sales. Since 2013, pools of structured settlement receivables have been originated for sale depending upon management’s assessment of interest rate risk, liquidity, and offers containing favorable terms and are classified on our balance sheet as loans held for sale. Increased sales on favorable terms during fiscal 2020 resulted in an increase in gain on sale from structured settlement annuity and state lottery receivables. Such sales did not recur to the same degree for during fiscal 2021.

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


	For the Fiscal Year Ended June 30,
(Dollars in thousands)	2021		2020
Salaries and related costs	$	152,576	$	144,341
Data processing and internet	40,719		30,671
Depreciation and amortization	24,124		24,443
Advertising and promotional	14,212		14,523
Occupancy and equipment	13,402		12,059
Professional services	22,241		11,095
Broker-dealer clearing charges	11,152		8,210
FDIC and regulator fees	10,603		5,538

General and administrative	25,481		24,886
Total non-interest expense	$	314,510	$	275,766

Non-interest expense totaled $314.5 million for the fiscal year ended June 30, 2021, an increase of $38.7 million compared to fiscal 2020. Salaries and related costs increased $8.2 million, or 5.7%, in fiscal 2021 primarily due to the staffing additions from increased staffing levels to support expansion in the Banking segment, specifically for lending and information technology infrastructure development activities. Our staff increased to 1165 from 1099 or 6.0% between fiscal year ended June 30, 2021 and 2020 and increased to 1099 from 1007 or 9.1% between fiscal year ended June 30, 2020 and 2019.

Data processing increased $10.0 million, primarily due to enhancements to customer interfaces and the Bank’s core processing system.

Advertising and promotion expense increased $0.3 million, primarily due to reductions in deposit marketing throughout the year.

Depreciation and amortization, decreased $0.3 million primarily due to reduced depreciation on computer hardware and furniture and fixtures.

Occupancy and equipment expense increased $1.3 million, primarily due to the timing of new property leases and an impairment reserve charge on the ~~results,~~early exit of a property lease of $0.9 million during fiscal 2021.

Professional services, which include accounting and legal fees, increased $11.1 million in fiscal 2021 compared to 2020. The increase in professional services was primarily due to increased legal and consulting expenses.

The Federal Deposit Insurance Corporation (“FDIC”) and regulator fee increased by $5.1 million in fiscal 2021 compared to fiscal 2020. The The increase corresponds to growth in average liabilities and small bank assessment credits received from the FDIC during fiscal 2020 which did not recur in fiscal 2021.

Broker-dealer clearing charges increased $2.9 million primarily due to increased correspondent and market activity.

General and administrative expenses increased by $0.6 million in fiscal 2021 compared to 2020. The increase was primarily due increased deposit servicing expenses.

Income Tax Expense. Income tax expense was $90.0 million for the fiscal year ended June 30, 2021 compared to $79.2 million for fiscal 2020. Our effective tax rates were 29.45% and 30.15% for the fiscal years ended June 30, 2021 and 2020, respectively.

As of June 30, 2020, the Company determined that certain stock-based compensation awards would not be granted under the ~~estimated fair value exceeded its carrying value~~plan, and ~~concluded~~the deferred tax assets related to these awards will not be realized. Accordingly, the Company wrote-off $6.8 million of a stock-based compensation deferred tax asset, resulting in a $2.0 million increase in tax expense for fiscal 2020.

The Company received federal and state tax credits for the years ended June 30, 2021 and 2020, respectively. These tax credits reduced the effective tax rate by approximately 0.59% and 0.77%, respectively.

SEGMENT RESULTS

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


	Fiscal Year Ended June 30, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	527,760	$	18,746	$	(7,764)	$	538,742
Provision for credit losses	23,750		—		—		23,750
Non-interest income	79,150		27,627		(1,516)		105,261
Non-interest expense	254,596		48,095		11,819		314,510
Income before taxes	$	328,564	$	(1,722)	$	(21,099)	$	305,743


	Fiscal Year Ended June 30, 2020
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	464,448	$	16,630	$	(3,467)	$	477,611
Provision for credit losses	42,200		—		—		42,200
Non-interest income	80,374		24,817		(2,204)		102,987
Non-interest expense	216,895		43,525		15,346		275,766
Income before taxes	$	285,727	$	(2,078)	$	(21,017)	$	262,632

Banking Business

For the fiscal year ended June 30, 2021, we had pre-tax income of $328.6 million compared to pre-tax income of $285.7 million for the fiscal year ended June 30, 2020. For the fiscal year ended June 30, 2021, the increase in pre-tax income was primarily related to increased net interest income due to loan and deposit growth.

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


	Fiscal Year Ended
		June 30, 2021		June 30, 2020
Efficiency ratio		41.95	%	39.81	%
Return on average assets		1.76	%	1.78	%
Interest rate spread		3.92	%	3.72	%
Net interest margin		4.11	%	4.19	%

Our Banking segment’s net interest margin exceeds our consolidated net interest margin. Our consolidated net interest margin includes certain items that are not reflected in the ~~goodwill~~calculation of our net interest margin within our Banking Business and reduce our consolidated net interest margin, such as the borrowing costs at our Holding Company and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities in our Securities Business, including items related to securities financing operations.


	For the Fiscal Years Ended June 30,
	2021						2020
(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid		Average Balance1		Interest Income/Expense		Average Yields Earned/Rates Paid
Assets:
Loans2,3	$	11,287,008	$	581,504	5.15	%	$	10,122,818	$	581,518	5.74	%
Interest-earning deposits in other financial institutions	1,329,029		1,359		0.10	%	700,659		8,839		1.26	%
Investment securities3	221,213		10,166		4.60	%	235,893		11,661		4.94	%
Stock of the regulatory agencies, at cost	17,250		932		5.40	%	25,696		1,532		5.96	%
Total interest-earning assets	$	12,854,500	$	593,961	4.62	%	$	11,085,066	$	603,550	5.44	%
Non-interest-earning assets	172,712						188,625
Total Assets	$	13,027,212					$	11,273,691
Liabilities and Stockholder's Equity:
Interest-bearing demand and savings	$	7,324,855	$	29,626	0.40	%	$	4,864,591	$	67,070	1.38	%
Time deposits	1,825,795		31,498		1.73	%	2,482,151		60,033		2.42	%

Advances from the FHLB	211,077		4,672		2.21	%	747,358		11,988		1.60	%
Borrowings, subordinated notes and debentures	116,255		406		0.35	%	3,092		11		0.36	%
Total interest-bearing liabilities	$	9,477,982	$	66,202	0.70	%	$	8,097,192	$	139,102	1.72	%
Non-interest-bearing demand deposits	2,209,932						2,000,755
Other non-interest-bearing liabilities	121,545						85,951
Stockholder's equity	$	1,217,753					$	1,089,793
Total Liabilities and Stockholders' Equity	$	13,027,212					$	11,273,691
Net interest income			$	527,759					$	464,448
Interest rate spread4					3.92	%					3.72	%
Net interest margin5					4.11	%					4.19	%

1Average balances are obtained from daily data.

2Loans include loans held for sale, loan premiums and unearned fees.

3Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loans include average balances of $27.2 million and $28.0 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2021 and 2020 twelve-month periods, respectively.

4Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.

5Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.

Net Interest Income. Net interest income totaled $527.8 million for the fiscal year ended June 30, 2021 compared to $464.4 million for the fiscal year ended June 30, 2020. The following table sets forth the effects of changing rates and volumes on our net interest income. Information is provided with respect to (i) effects on interest income and interest expense attributable to changes in volume (changes in volume multiplied by prior rate); and (ii) effects on interest income and interest expense attributable to changes in rate (changes in rate multiplied by prior volume). The change in interest due to both volume and rate has been allocated proportionally to both, based on their relative absolute values.


	Fiscal Year Ended June 30, 2021 vs 2020
	Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)
Increase (decrease) in interest income:
Loans and leases	$	63,068	$	(63,082)	$	(14)

Interest-earning deposits in other financial institutions	4,330		(11,810)		(7,480)
Investment securities	(710)		(785)		(1,495)

Stock of the regulatory agencies	(466)		(134)		(600)
Total increase (decrease) in interest income	$	66,222	$	(75,811)	$	(9,589)
Increase (decrease) in interest expense:
Interest-bearing demand and savings	$	24,084	$	(61,528)	$	(37,444)
Time deposits	(13,730)		(14,805)		(28,535)

Advances from the FHLB	(10,732)		3,416		(7,316)

Other borrowings	395		—		395
Total increase (decrease) in interest expense	$	17	$	(72,917)	$	(72,900)

The Banking segment’s net interest income for the fiscal year ended June 30, 2021 totaled $527.8 million, an increase of 13.6%, compared to net interest income of $464.4 million for the fiscal year ended June 30, 2020. The growth of net interest income is primarily due to net loan portfolio growth and a reduction of rates paid on deposits.

The Banking segment’s non-interest income creased $1.2 million from $80.4 million to $79.2 million for the fiscal year ended June 30, 2021 compared to the fiscal year ended June 30, 2020. The decrease in non-interest income for the fiscal year ended June 30, 2021, as primarily the result of a decrease of $17.0 million in banking and service fees, primarily from Emerald Prepaid Mastercard® and Refund Transfer products associated with H&R Block that did not recur in fiscal 2021, and a $6.4 million decrease in gain on sale-other, as certain sales of lottery receivables and sales of Refund Advance loans to H&R Block in fiscal 2020 did not recur in fiscal 2021, partially offset by an increase in mortgage banking income of $21.0 million driven by the decline of mortgage rates to record lows over the year, and an increase of $1.2 million in prepayment penalty fee income.

Non-interest expense totaled $254.6 million for the fiscal year ended June 30, 2021, an increase of $37.7 million compared to fiscal 2020. Salaries and related costs increased $13.3 million, or 11.9%, in fiscal 2021 due to increased staffing levels to support growth in staffing specifically for lending and information technology infrastructure development activities, a $9.8 million increase in data processing expense for loan and deposit systems enhancements, a $7.9 million increase in professional services due to increased legal and consulting expenses, an increase of $4.9 million in FDIC and OCC standard regulatory charges due to growth in average liabilities and a small bank assessment credit received from the FDIC in fiscal 2020 which did not recur, and a $1.6 million increase in occupancy expense primarily due to an impairment reserve charge on the early exit of a property lease.

Securities Business

For the fiscal year ended June 30, 2021, our Securities Business segment had a loss before taxes of $1.7 million an improvement of 17.1% compared to the loss before taxes of $2.1 million for the fiscal year ended June 30, 2020.

The following table provides our Securities Business operating results:


	Fiscal Year Ended
(Dollars in thousands)	June 30, 2021		June 30, 2020
Net interest income	$	18,746	$	16,630
Non-interest income	27,627		24,817
Non-interest expense	48,095		43,525
Income (Loss) before income taxes	$	(1,722)	$	(2,078)

Net interest income for the fiscal year ended June 30, 2021 was $18.7 million compared to $16.6 million for the fiscal year ended June 30, 2020, an increase of $2.1 million due to increased activity. In the Securities business, interest is earned on margin loan balances, securities borrowed, and cash deposit balances. Interest expense is incurred from cash borrowed through bank lines and securities lending.

Non-interest income totaled $27.6 million for the fiscal year ended June 30, 2021, an increase of $2.8 million compared to the $24.8 million during the fiscal year ended June 30, 2020. Increased activity resulted in an increase of $3.3 million from correspondent fees and an increase of $2.7 million from clearing and custodial related fees, partially offset by a decrease of $3.9 million in fees earned on managing customers’ FDIC insured bank deposits due to decreased rates.

Non-interest expense was $48.1 million during the fiscal year ended June 30, 2021 an increase of $4.6 million for the $43.5 million during the fiscal year ended June 30, 2020. The increase was primarily the result of an increase broker-dealer clearing charges of $2.9 million due to increased activity and an increase in professional services of $2.1 million due to an increase in legal expenses.

Selected information concerning Axos Clearing LLC follows as or for the year ended:


	June 30,
(Dollars in thousands)	2021			2020
Compensation as a % of net revenue	32.4		%	39.2		%
FDIC insured program balances (end of period)	$	730,248		$	450,251
Customer margin balances (end of period)	$	327,148		$	206,702
Customer funds on deposit, including short credits (end of period)	$	322,153		$	194,042

Clearing:
Total tickets	2,053,362			1,228,635
Correspondents (end of period)	69			61

Securities lending:
Interest-earning assets – stock borrowed (end of period)	$	619,088		$	222,368
Interest-bearing liabilities – stock loaned (end of period)	$	728,988		$	255,945

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, 2022 AND JUNE 30, 2021

Our total assets increased $3.1 billion, or 22.0%, to $17.4 billion, as of June 30, 2022, up from $14.3 billion at June 30, 2021. The loan portfolio increased $2.7 billion on a net basis, primarily from portfolio loan originations of $10.4 billion, less principal repayments and other ~~identifiable intangible assets were fully recognized.~~adjustments of $7.7 billion. Total cash increased by $0.5 billion primarily due to increased deposits.Total liabilities increased by $2.9 billion or 22.5%, to $15.8 billion at June 30, 2022, up from $12.9 billion at June 30, 2021. The increase in total liabilities resulted primarily from growth in deposits of $3.1 billion, partially offset by decreased securities loaned of $0.3 billion and decreased advances from the Federal Home Loan Bank of $0.2 billion. Stockholders’ equity increased by $242.0 million, or 17.3%, to $1.6 billion at June 30, 2022, up from $1.4 billion at June 30, 2021. The

increase was largely the result of $240.7 million in net income for the fiscal year, $6.8 million vesting and issuance of RSUs and stock-based compensation expense, partially offset by a $5.4 million unrealized loss in other comprehensive income, net of tax.

~~USE~~RESULTS OF ~~NON-GAAP FINANCIAL MEASURES~~OPERATIONS

~~In addition~~Our results of operations depend on our net interest income, which is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Our net interest income has increased as a result of the growth in our interest earning assets and is subject to competitive factors in online banking and other markets. Our net interest income is reduced by our estimate of credit loss provisions for our loan portfolio. We also earn non-interest income primarily from mortgage banking activities, banking products and service activity, our Securities Business, prepaid card fee income, prepayment fee income from multifamily and commercial borrowers who repay their loans before maturity and from gains on sales of other loans and investment securities. Losses on investment securities reduce non-interest income. The largest component of non-interest expense is salary and benefits, which is a function of the number of personnel, which increased to 1,335 full-time equivalent employees at June 30, 2022, from 1,165 full time employees at June 30, 2021. We are subject to federal and state income taxes, and our effective tax rates were 29.19%, 29.45% and 30.15% for the fiscal years ended June 30, 2022, 2021, and 2020, respectively. Other factors that affect our results of operations include expenses relating to data processing, advertising, depreciation, occupancy, professional services, and other miscellaneous expenses.

COMPARISON OF THE FISCAL YEARS ENDED JUNE 30, 2022 AND JUNE 30, 2021


	Fiscal Year Ended June 30, 2022 vs 2021
	Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)
Increase (decrease) in interest income:
Loans	$	63,006	$	(20,788)	$	42,218

Interest-earning deposits in other financial institutions	(602)		2,918		2,316
Investment securities	(724)		(1,884)		(2,608)
Securities borrowed and margin lending	2,314		(2,268)		46
Stock of the regulatory agencies	72		(179)		(107)
Total increase (decrease) in interest income	$	64,066	$	(22,201)	$	41,865
Increase (decrease) in interest expense:
Interest-bearing demand and savings	$	(1,735)	$	(7,243)	$	(8,978)
Time deposits	(8,570)		(9,361)		(17,931)

Securities loaned	2,301		(2,348)		(47)
Advances from the FHLB	180		(552)		(372)
Other borrowings	(1,486)		2,263		777
Total increase (decrease) in interest expense	$	(9,310)	$	(17,241)	$	(26,551)

Interest Income. Interest income for the fiscal year ended June 30, 2022 totaled $659.7 million, an increase of $41.9 million, or 6.8%, compared to $617.9 million in interest income for the fiscal year ended June 30, 2021 primarily due to growth in volume of interest-earning assets from loan originations, mainly from commercial real estate and commercial & industrial lending, partially offset by reduced rates on interest-earning assets. Average interest-earning assets for the fiscal year ended June 30, 2022 increased by $937.4 million compared to the ~~results presented~~fiscal year ended June 30, 2021 primarily due to loan originations for investment which totaled $10.4 billion during the year ended June 30, 2022. Yields on loans decreased by 18 basis points to 4.98% for the fiscal year ended June 30, 2022, primarily due to declines in ~~accordance with GAAP, this report includes non-GAAP financial measures such~~market interest rates. For the fiscal year ended June 30, 2022, the growth in average balances contributed additional interest income of $64.1 million, which was offset by a $22.2 million decrease in interest income due to declines in market interest rates. The average yield earned on our interest-earning assets was 4.49% for the fiscal year ended June 30, 2022, even compared to 4.49% in 2021.

Interest Expense. Interest expense totaled $52.6 million for the fiscal year ended June 30, 2022, a decrease of $26.6 million, or 33.6% compared to $79.1 million in interest expense during the fiscal year ended June 30, 2021, due primarily to a $1.7 billion increase in non-interest bearing deposits and decreased rates on deposits, as ~~adjusted earnings, adjusted earnings per common share,~~a result of the Federal Reserve’s decision to maintain the Fed Funds target rate near zero for most of the fiscal year. The average rate paid on all of our interest-bearing liabilities decreased to 0.58% for the fiscal year ended June 30, 2022 from 0.79% for the fiscal year ended June 30, 2021, due primarily to decreased rates on deposits. Average interest-bearing liabilities for the fiscal year ended June 30, 2022

decreased $873.3 million compared to fiscal 2021, offset by an increase in non-interest bearing deposits. The average rate on interest-bearing demand and ~~tangible book value per common share. Non-GAAP financial measures have inherent limitations,~~savings deposits decreased to 0.30% from 0.40% due to decreases in prevailing deposit rates across the industry. The rates on borrowings, subordinated notes and debentures also increased to 4.36% from 3.65% due to rates in effect when borrowing for operational needs. The average rate on time deposits decreased to 1.11% for the fiscal year ended June 30, 2022 from 1.73% for the fiscal year ended June 30, 2021, due to higher rate maturing time deposits. The average non-interest-bearing demand deposits were $3,927.2 million for the fiscal year ended June 30, 2022, up from $2,182.0 million, representing an increase of $1,745.2 million.

Provision for Credit Losses. Provision for credit losses was $18.5 million for the fiscal year ended June 30, 2022 and $23.8 million for fiscal 2021. The decrease of $5.3 million for fiscal year 2022 was due to favorable changes in economic and business conditions resulting from reduced levels of disruptions from the COVID-19 pandemic, partially offset by loan growth and changes in loan mix. The provisions are ~~not required~~made to maintain our allowance for credit losses at levels which management believes to be ~~uniformly applied and are not audited. Readers should be aware~~adequate. The assessment of ~~these limitations and should be cautious as to their use of such measures. Although we believe~~ the ~~non-GAAP financial measures disclosed in this report enhance investors’ understanding~~adequacy of our ~~business~~allowance for credit losses is based upon a number of quantitative and ~~performance, these non-GAAP measures should not be considered~~qualitative factors, including levels and trends of past due and nonaccrual loans, loss history and changes in ~~isolation, or as~~the volume and mix of loans and collateral values.

See “Asset Quality and Allowance for Credit Losses - Loans” for discussion of our allowance for credit losses and the related loss provisions.

Non-interest Income. The following table sets forth information regarding our non-interest income:


	For the Fiscal Year Ended June 30,
(Dollars in thousands)	2022		2021









Prepayment penalty fee income	$	13,303	$	7,166
Gain on sale – other	165		491
Mortgage banking income	19,033		42,150
Advisory fee income	29,230		—
Broker-dealer fee income	22,880		26,317
Banking and service fees	28,752		29,137
Total non-interest income	$	113,363	$	105,261

~~We define net~~$29.2 million increase in Advisory fee income ~~without~~from custody and mutual fund fees earned by the ~~after-tax impact of non-recurring acquisition-related costs,~~newly acquired AAS division and excess FDIC expense, and other costs (unusual or non-recurring charges), (“adjusted earnings”), a non-GAAP financial measure. Excess FDIC expense is defined as the higher insurance costs associated with increased levels of ~~short-term brokered deposits~~prepayment penalty fee income of $6.1 million, partially offset by a decrease of $23.1 million in ~~anticipation of the acquisition of deposits from Nationwide Bank. Other costs are~~mortgage banking income, mainly due to raising rates and a ~~$15.3~~$3.4 million ~~bad debt expense related~~decrease in broker-dealer fee income. Mortgage banking income for fiscal 2022 included a net mortgage servicing rights adjustment of approximately $2.3 million due to ~~a correspondent customer of our clearing broker-dealer. Adjusted earnings per diluted common share (“adjusted EPS”), a non-GAAP financial~~

~~measure, is calculated by dividing non-GAAP adjusted earnings by the average number of diluted common shares outstanding during the period. We believe the non-GAAP measures of adjusted earnings~~expected higher interest rates and adjusted EPS provide useful information about the Bank’s operating performance. Excluding the non-recurring acquisition related costs, excessive FDIC expense, and other costs provides investors with an understanding of Axos’ core business.slower mortgage prepayments.

~~Below is a reconciliation of net income to adjusted earnings and adjusted EPS (Non-GAAP)~~Non-interest Expense. The following table sets forth information regarding our non-interest expense for the periods shown:


	For the Fiscal Year Ended June 30,
(Dollars in thousands)	2022		2021
Salaries and related costs	$	167,390	$	152,576
Data processing	50,159		40,719
Depreciation and amortization	24,596		24,124
Advertising and promotional	13,580		14,212
Occupancy and equipment	13,745		13,402
Professional services	22,482		22,241
Broker-dealer clearing charges	15,184		11,152
FDIC and regulator fees	11,823		10,603

General and administrative expenses	43,103		25,481
Total non-interest expense	$	362,062	$	314,510

For Twelve Months Ended June 30,
(Dollars in thousands, except per share amounts) 2019 2018
Net income $ 155,131
$ 152,411
Acquisition-related costs
6,714
1,470
Excess FDIC expense 1,111
—
Other costs 15,299
—
Income taxes (6,267 ) (535 )
Adjusted earnings (Non-GAAP) $ 171,988
$ 153,346
Adjusted EPS (Non-GAAP) $ 2.75
$ 2.39
Data processing increased $9.4 million, primarily due to enhancements to customer interfaces and the Bank’s core processing system.

~~We define book value adjusted~~Depreciation and amortization, increased $0.5 million primarily due to amortization of intangibles as a result of the AAS acquisition and depreciation on lending platform enhancements and infrastructure development.

Advertising and promotional expense decreased $0.6 million, primarily due to reductions in mortgage lead generation and deposit marketing costs.

Professional services, which include accounting and ~~other intangible assets as tangible book value~~legal fees, increased $0.2 million in fiscal 2022 compared to 2021. The increase in professional services was primarily due to increased legal and consulting expenses.

Broker-dealer clearing charges increased $4.0 million, primarily attributable to the acquisition of AAS and increased clearing charges due to higher activity.

The Federal Deposit Insurance Corporation (“~~tangible book value”~~FDIC”)~~, a non-GAAP financial measure. Tangible book value is calculated using common stockholders’ equity minus mortgage servicing rights, goodwill~~ and ~~other intangible assets. Tangible book value per common share, a non-GAAP financial measure, is calculated~~regulator fees increased by ~~dividing tangible book value by the common shares outstanding~~$1.2 million in fiscal 2022 compared to fiscal 2021. The increase corresponds to growth in average liabilities at the ~~end~~Bank and increased assessment rates during fiscal 2022.

The Company received federal and state tax credits for the years ended June 30, 2022 and 2021, respectively. These tax credits reduced the effective tax rate by approximately 0.44% and 0.59%, respectively.

SEGMENT RESULTS

The Company determines reportable segments based on the services offered, the significance of the ~~period. We believe tangible book value per common share is useful in evaluating~~services offered, the significance of those services to the Company’s ~~capital strength,~~ financial condition and ~~ability to manage potential losses.~~

~~Below is a reconciliation of total stockholders’ equity to tangible book value (Non-GAAP) as~~operating results and management’s regular review of the ~~dates indicated:~~operating results of those services. The Company operates through two operating segments: Banking Business and Securities Business. In order to reconcile the two segments to the consolidated totals, the Company includes parent-only activities and intercompany eliminations. The following tables present the operating results of the segments:


	Fiscal Year Ended June 30, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	597,833	$	17,580	$	(8,255)	$	607,158
Provision for credit losses	18,500		—		—		18,500
Non-interest income	60,881		64,069		(11,587)		113,363
Non-interest expense	274,079		84,014		3,969		362,062
Income (loss) before taxes	$	366,135	$	(2,365)	$	(23,811)	$	339,959


	Fiscal Year Ended June 30, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	527,760	$	18,746	$	(7,764)	$	538,742
Provision for credit losses	23,750		—		—		23,750
Non-interest income	79,150		27,627		(1,516)		105,261
Non-interest expense	254,596		48,095		11,819		314,510
Income (loss) before taxes	$	328,564	$	(1,722)	$	(21,099)	$	305,743

At the Fiscal Years Ended June 30,
(Dollars in thousands, except per share amounts) 2019 2018 2017 2016 2015
Total stockholders’ equity $ 1,073,050
$ 960,513
$ 834,247
$ 683,590
$ 533,526
Less: preferred stock 5,063
5,063
5,063
5,063
5,063
Common stockholders’ equity 1,067,987
955,450
829,184
678,527
528,463
Less: mortgage servicing rights, carried at fair value 9,784
10,752
7,200
3,943
2,098
Less: goodwill and intangible assets 134,893
67,788
—
—
—
Tangible common stockholders’ equity (Non-GAAP) $ 923,310
$ 876,910
$ 821,984
$ 674,584
$ 526,365
Common shares outstanding at end of period 61,128,817
62,688,064
63,536,244
63,219,392
62,075,004
Tangible book value per common share (Non-GAAP) $ 15.10
$ 13.99
$ 12.94
$ 10.67
$ 8.48
Banking Business

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

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


	Fiscal Year Ended
		June 30, 2022		June 30, 2021
Efficiency ratio		41.61	%	41.95	%
Return on average assets		1.64	%	1.76	%
Interest rate spread		4.18	%	3.92	%
Net interest margin		4.36	%	4.11	%

The following ~~tables set forth, for the periods indicated,~~table presents our Banking segment’s information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin:


	For the Fiscal Years Ended June 30,																			For the Fiscal Years Ended June 30,
	2019						2018						2017							2022						2021
(Dollars in thousands)	Average Balance¹		Interest Income / Expense		Average Yields Earned / Rates Paid		Average Balance¹		Interest Income / Expense		Average Yields Earned / Rates Paid		Average Balance¹		Interest Income / Expense		Average Yields Earned / Rates Paid		(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid		Average Balance1		Interest Income/Expense		Average Yields Earned/Rates Paid
Assets:																			Assets:
Loans and leases^2,3	$	8,974,820	$	525,317	5.85	%	$	7,893,072	$	446,991	5.66	%	$	6,819,102	$	358,849	5.26	%
Loans2,3																			Loans2,3	$	12,539,502	$	624,501	4.98	%	$	11,287,008	$	581,504	5.15	%
Interest-earning deposits in other financial institutions	631,228		13,495		2.14	%	807,348		12,450		1.54	%	658,580		5,204		0.79	%	Interest-earning deposits in other financial institutions	953,490		3,189		0.33	%	1,329,029		1,359		0.10	%
Investment securities	210,189		13,943		6.63	%	209,434		11,335		5.41	%	393,334		16,889		4.29	%
Securities borrowed and margin lending	173,829		8,746		5.03	%	N/A		N/A		—	%	N/A		N/A		—	%
Stock of the regulatory agencies	41,078		3,386		8.24	%	61,222		4,298		7.02	%	55,577		6,344		11.41	%
Investment securities3																			Investment securities3	198,637		7,410		3.73	%	221,213		10,166		4.60	%
Stock of the regulatory agencies, at cost																			Stock of the regulatory agencies, at cost	18,789		1,132		6.02	%	17,250		932		5.40	%
Total interest-earning assets	10,031,144		564,887		5.63	%	8,971,076		475,074		5.30	%	7,926,593		387,286		4.89	%	Total interest-earning assets	13,710,418		636,232		4.64	%	12,854,500		593,961		4.62	%
Non-interest-earning assets	234,993						100,380						116,545						Non-interest-earning assets	296,228						172,712
Total assets	$	10,266,137					$	9,071,456					$	8,043,138
Liabilities and Stockholders’ Equity:
Total Assets																			Total Assets	$	14,006,646					$	13,027,212
Liabilities and Stockholder's Equity:																			Liabilities and Stockholder's Equity:
Interest-bearing demand and savings	$	3,906,833	$	61,391	1.57	%	$	4,706,238	$	54,013	1.15	%	$	4,619,769	$	34,556	0.75	%	Interest-bearing demand and savings	$	6,843,840	$	20,207	0.30	%	$	7,324,855	$	29,626	0.40	%
Time deposits	2,322,039		55,689		2.40	%	990,635		25,838		2.61	%	941,919		21,938		2.33	%	Time deposits	1,226,774		13,567		1.11	%	1,825,795		31,498		1.73	%
Securities sold under agreements to repurchase	—		—		—	%	5,575		229		4.11	%	33,068		1,465		4.43	%
Securities loaned	221,469		748		0.34	%	N/A		N/A		—	%	N/A		N/A		—	%

Advances from the FHLB	1,397,460		32,834		2.35	%	1,296,120		22,848		1.76	%	798,982		12,403		1.55	%	Advances from the FHLB	349,796		4,625		1.32	%	211,077		4,672		2.21	%
Borrowings, subordinated notes and debentures	104,287		5,620		5.39	%	54,522		3,652		6.70	%	55,873		3,697		6.62	%	Borrowings, subordinated notes and debentures	93		—		—	%	116,255		406		0.35	%
Total interest-bearing liabilities	7,952,088		156,282		1.97	%	7,053,090		106,580		1.51	%	6,449,611		74,059		1.15	%	Total interest-bearing liabilities	$	8,420,503	$	38,399	0.46	%	$	9,477,982	$	66,202	0.70	%
Non-interest-bearing demand deposits	1,227,285						1,052,944						774,411						Non-interest-bearing demand deposits	4,012,615						2,209,932
Other non-interest-bearing liabilities	76,651						68,361						58,040						Other non-interest-bearing liabilities	143,841						121,545
Stockholders’ equity	1,010,113						897,061						761,076
Total liabilities and stockholders’ equity	$	10,266,137					$	9,071,456					$	8,043,138
Stockholder's equity																			Stockholder's equity	1,429,687						1,217,753
Total Liabilities and Stockholders' Equity																			Total Liabilities and Stockholders' Equity	$	14,006,646					$	13,027,212
Net interest income			$	408,605					$	368,494					$	313,227			Net interest income			$	597,833					$	527,759
Interest rate spread⁴					3.66	%					3.79	%					3.74	%	Interest rate spread4					4.18	%					3.92	%
Net interest margin⁵					4.07	%					4.11	%					3.95	%	Net interest margin5					4.36	%					4.11	%

(Dollars in thousands) As of and for the Three Months ended June 30, 2019
Compensation as a % of net revenue 35.0 %
FDIC insured program balances at the Bank (end of period) $ 341,576
Customer margin balances (end of period) $ 189,193
Customer funds on deposit, including short credits (end of period) $ 206,469

Clearing:
Total tickets 595,962
Correspondents (end of period) 62

Securities lending:
Interest-earning assets – stock borrowed (end of period) $ 203,192
Interest-bearing liabilities – stock loaned (end of period) $ 198,356

~~COMPARISON OF THE FISCAL YEAR ENDED~~ ~~JUNE 30, 2018~~ ~~AND~~ ~~JUNE 30, 2017~~

Net Interest Income. Net interest income totaled ~~$368.5~~$527.8 million for the fiscal year ended June 30, ~~2018~~2021 compared to ~~$313.2~~$464.4 million for the fiscal year ended June 30, ~~2017.~~2020. The following table sets forth the effects of changing rates and volumes on our net interest income. Information is provided with respect to (i) effects on interest income and interest expense attributable to changes in volume (changes in volume multiplied by prior rate); and (ii) effects on interest income and interest expense attributable to changes in rate (changes in rate multiplied by prior volume). The change in interest due to both volume and rate has been allocated proportionally to both, based on their relative absolute values.


	Fiscal Year Ended June 30, 2021 vs 2020
	Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)
Increase (decrease) in interest income:
Loans and leases	$	63,068	$	(63,082)	$	(14)

Interest-earning deposits in other financial institutions	4,330		(11,810)		(7,480)
Investment securities	(710)		(785)		(1,495)

Stock of the regulatory agencies	(466)		(134)		(600)
Total increase (decrease) in interest income	$	66,222	$	(75,811)	$	(9,589)
Increase (decrease) in interest expense:
Interest-bearing demand and savings	$	24,084	$	(61,528)	$	(37,444)
Time deposits	(13,730)		(14,805)		(28,535)

Advances from the FHLB	(10,732)		3,416		(7,316)

Other borrowings	395		—		395
Total increase (decrease) in interest expense	$	17	$	(72,917)	$	(72,900)

Fiscal Year Ended June 30, 2018 vs 2017
Increase (Decrease) Due to
(Dollars in thousands) Volume Rate
Total
Increase
(Decrease)
Increase/(decrease) in interest income:
Loan and Leases $ 59,441
$ 28,701
$ 88,142
Interest-earning deposits in other financial institutions 1,393
5,853
7,246
Investment securities (9,217 ) 3,663
(5,554 )
Stock of the FHLB, at cost 592
(2,638 ) (2,046 )
Total increase/(decrease) in interest income $ 52,209
$ 35,579
$ 87,788
Increase/(decrease) in interest expense:
Interest-bearing demand and savings $ 660
$ 18,797
$ 19,457
Time deposits 1,174
2,726
3,900
Securities sold under agreements to repurchase (1,137 ) (99 ) (1,236 )
Advances from the FHLB 8,577
1,868
10,445
Other borrowings (90 ) 45
(45 )
Total increase/(decrease) in interest expense $ 9,184
$ 23,337
$ 32,521

~~Interest Income~~. ~~Interest income for the fiscal year ended June 30, 2018 totaled $475.1 million, an increase of $87.8 million, or 22.7%, compared to $387.3 million in~~The Banking segment’s net interest income for the fiscal year ended June 30, ~~2017 primarily due~~2021 totaled $527.8 million, an increase of 13.6%, compared to ~~growth in volume~~net interest income of interest-earning assets from loan originations, primarily from commercial & industrial lending as well as accretion from origination fees from Refund Advance loans. Fundings of Refund Advance loans increased from $0.3 billion to $1.1 billion for the fiscal years ended June 30, 2017 and June 30, 2018, respectively. Average interest-earning assets$464.4 million for the fiscal year ended June 30, ~~2018 increased by $1,044.5~~2020. The growth of net interest income is primarily due to net loan portfolio growth and a reduction of rates paid on deposits.

The Banking segment’s non-interest income creased $1.2 million from $80.4 million to $79.2 million for the fiscal year ended June 30, 2021 compared to the fiscal year ended June 30, ~~2017 primarily due to loan and lease originations for investment which increased $1,740.1 million during the year ended June 30, 2018. Yields on loans and leases increased by 40 basis points to 5.66%~~2020. The decrease in non-interest income for the fiscal year ended June 30, ~~2018,~~2021, as primarily ~~due~~the result of a decrease of $17.0 million in banking and service fees, primarily from Emerald Prepaid Mastercard® and Refund Transfer products associated with H&R Block that did not recur in fiscal 2021, and a $6.4 million decrease in gain on sale-other, as certain sales of lottery receivables and sales of Refund Advance loans to ~~increased yields~~H&R Block in ~~the single family, commercial & industrial and H&R Block-branded loan products. For the~~ fiscal ~~year ended June 30, 2018, the growth~~2020 did not recur in ~~average balances contributed additional interest~~fiscal 2021, partially offset by an increase in mortgage banking income of ~~$52.2~~$21.0 million ~~which was supplemented~~driven by ~~a $35.6 million increase in interest income due~~the decline of mortgage rates to the increase in average rate. The average yield earned on our interest-earning assets increased to 5.30% for the fiscal year ended June 30, 2018, up from 4.89% for the same period in 2017 primarily due to the increase in rate from loans and leases. As a result of the Federal Reserve decisions to increase the Fed Funds raterecord lows over the ~~last~~ year, ~~we have marked up our adjustable loans~~ and ~~have increased the market rates on new loans. A contributing factor to the~~an increase of ~~loans and leases income is the amortization of origination fees for H&R Block-branded products.~~$1.2 million in prepayment penalty fee income.

~~Interest Expense~~. ~~Interest~~Non-interest expense totaled ~~$106.6~~$254.6 million for the fiscal year ended June 30, ~~2018,~~2021, an increase of ~~$32.5~~$37.7 million compared to fiscal 2020. Salaries and related costs increased $13.3 million, or ~~43.9% compared~~11.9%, in fiscal 2021 due to ~~$74.1~~increased staffing levels to support growth in staffing specifically for lending and information technology infrastructure development activities, a $9.8 million increase in data processing expense for loan and deposit systems enhancements, a $7.9 million increase in professional services due to increased legal and consulting expenses, an increase of $4.9 million in ~~interest~~FDIC and OCC standard regulatory charges due to growth in average liabilities and a small bank assessment credit received from the FDIC in fiscal 2020 which did not recur, and a $1.6 million increase in occupancy expense ~~during~~primarily due to an impairment reserve charge on the early exit of a property lease.

Securities Business

For the fiscal year ended June 30, ~~2017, due primarily to increased rates on deposits and advances, as~~2021, our Securities Business segment had a ~~result~~loss before taxes of ~~the Federal Reserve decisions to increase the Fed Funds rate over the last year. The average rate paid on all~~$1.7 million an improvement of our interest-bearing liabilities increased to 1.51% for the fiscal year ended June 30, 2018 from 1.15% for the fiscal year ended June 30, 2017, due primarily to increased rates on deposits and advances from FHLB. Average interest-bearing liabilities for the fiscal year ended June 30, 2018 increased $603.5 million17.1% compared to ~~fiscal 2017. The average rate on interest-bearing demand and savings deposits increased to 1.15% from 0.75% due to increases in prevailing deposit rates across~~ the industry. The rates on advances from the FHLB also increased to 1.76% from 1.55% due primarily to the Fed rate increases. The average rate on time deposits increased to 2.61% for the fiscal year ended June 30, 2018 from 2.33% for the fiscal year ended June 30, 2017, due to Fed rate increases. Average FHLB advances for the fiscal year ended June 30, 2018 increased $497.1 million, or 62.2% compared to fiscal 2017. The average non-interest-bearing demand deposits were $1,052.9loss before taxes of $2.1 million for the fiscal year ended June 30, ~~2018, representing an increase of $278.5 million.~~2020.

~~Provision~~The following table provides our Securities Business operating results:


	Fiscal Year Ended
(Dollars in thousands)	June 30, 2021		June 30, 2020
Net interest income	$	18,746	$	16,630
Non-interest income	27,627		24,817
Non-interest expense	48,095		43,525
Income (Loss) before income taxes	$	(1,722)	$	(2,078)

Net interest income for ~~Loan and Lease Losses~~. ~~Provision for loan and lease losses~~the fiscal year ended June 30, 2021 was ~~$25.8~~$18.7 million compared to $16.6 million for the fiscal year ended June 30, ~~2018 and $11.1~~2020, an increase of $2.1 million ~~for fiscal 2017. The increase in the loan and lease loss provision was primarily~~ due to increased activity. In the ~~increase~~

~~in Refund Advance~~Securities business, interest is earned on margin loan ~~fundings~~balances, securities borrowed, and cash deposit balances. Interest expense is incurred from ~~$0.3 billion to $1.1 billion during fiscal 2017~~cash borrowed through bank lines and 2018, respectively, combined with overall loan portfolio growth. The provisions are made to maintain our allowance for loan and lease losses at levels which management believes to be adequate. The assessment of the adequacy of our allowance for loan and lease losses is based upon a number of quantitative and qualitative factors, including levels and trends of past due and nonaccrual loans, loss history and changes in the volume and mix of loans and collateral values.

~~See “Asset Quality and Allowance for Loan and Lease Losses” for discussion of our allowance for loan and lease losses and the related loss provisions.~~

~~Non-interest Income~~. ~~The following table sets forth information regarding our non-interest income:~~

For the Fiscal Year Ended June 30,
(Dollars in thousands) 2018 2017
Total realized gain (loss) on securities (18 ) 3,920
Unrealized loss on securities:
Total impairment losses (6,271 ) (10,937 )
Loss (gain) recognized in other comprehensive income 6,115
8,973
Net impairment loss recognized in earnings (156 ) (1,964 )
Fair value gain (loss) on trading securities —
743
Total unrealized loss on securities (156 ) (1,221 )
Prepayment penalty fee income 3,862
4,574
Gain on sale-other 5,734
4,487
Mortgage banking income 13,755
14,284
Banking and service fees 47,764
42,088
Total non-interest income $ 70,941
$ 68,132

Our relationship with H&R Block began in fiscal 2016 and introduced seasonality into banking and service fees category of non-interest income, with an increase during our second quarter and the peak income in this category typically occurring during our third fiscal quarter ended March 31. Therefore, banking and services fees for the three months ended March 31, are not indicative of results to be expected for other quarters during the fiscal year. Historically, the primary non-interest income generating H&R Block products and services that lead to the increased banking and service fees are Emerald Prepaid Mastercard^® ~~(“EPC”) and Refund Transfer (“RT”).~~securities lending.

Non-interest income totaled ~~$70.9~~$27.6 million for the fiscal year ended June 30, ~~2018~~2021, an increase of $2.8 million compared to ~~non-interest income~~the $24.8 million during the fiscal year ended June 30, 2020. Increased activity resulted in an increase of ~~$68.1~~$3.3 million from correspondent fees and an increase of $2.7 million from clearing and custodial related fees, partially offset by a decrease of $3.9 million in fees earned on managing customers’ FDIC insured bank deposits due to decreased rates.

Non-interest expense was $48.1 million during the fiscal year ended June 30, 2021 an increase of $4.6 million for the $43.5 million during the fiscal ~~2017.~~year ended June 30, 2020. The increase was primarily the result of an increase broker-dealer clearing charges of ~~$5.7~~$2.9 million in banking and service fees due to H&R Block-branded products and service fee income, a $1.2 million increase in gain on sale-other primarily from sales of structured settlements and lottery receivables, and a decrease in net unrealized loss on securities of $1.1 million, partially offset by a decrease in realized gain from sale of securities of $3.9 million, decreased levels of prepayment penalty fee income of $0.7 million, and a decrease in mortgage banking income of $0.5 million. Banking and service fees includes H&R Block-branded product fees, deposit fees, fee income from prepaid card sponsors, and certain C&I loan fees. The primary non-interest income-generating H&R Block products and services that led to the increased banking and service fees are EPC and RT. For the fiscal year ended June 30, 2018, EPC increased $0.2 million to $8.0 million from $7.8 million for fiscal 2017. For the fiscal year ended June 30, 2018, RT decreased $0.3 million to $12.5 million from $12.8 million for fiscal 2017.

Included in gain on sale – other are sales of unsecured and secured consumer and business loans originated through introductions from our third-party partner relationships, for example H&R Block-branded Emerald Advance, and sales of structured settlement annuity and state lottery receivables. We engage in the wholesale and retail purchase of state lottery prize and structured settlement annuity payments. These payments are high credit quality deferred payment receivables having a state lottery commission or investment grade (top two tiers) insurance company payor. The Bank originates contracts for the retail purchase of such payments and classifies these under the heading of Factoring in the loan portfolio. Factoring yields are typically higher than mortgage loan rates. Typically, the gain received upon sale of these payment streams is greater than the gain received from an equivalent amount of mortgage loan sales. Since 2013, pools of structured settlement receivables have been originated for sale depending upon management’s assessment of interest rate risk, liquidity, and offers containing favorable terms and are classified on our balance sheet as loans held for sale. Increased originations and favorable terms during fiscal 2018 resulted in an increase in gain on sale from structured settlement annuity and state lottery receivables.

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

For the Fiscal Year Ended June 30,
(Dollars in thousands) 2018 2017
Salaries and related costs $ 100,975
$ 81,821
Data processing and internet 17,400
13,323
Advertising and promotional 15,500
9,367
Depreciation and amortization 8,574
6,094
Occupancy and equipment 6,063
5,612
Professional services 5,280
4,980
FDIC and regulator fees 4,860
4,330
Real estate owned and repossessed vehicles 260
498
Other general and administrative 15,024
11,580
Total non-interest expense $ 173,936
$ 137,605

Non-interest expense totaled $173.9 million for the fiscal year ended June 30, 2018, an increase of $36.3 million compared to fiscal 2017. Salaries and related costs increased $19.2 million, or 23.4%, in fiscal 2018 due to increased ~~staffing levels to support growth in the Bank’s staffing for lending, information technology infrastructure development, regulatory compliance,~~activity and ~~the trustee and fiduciary services. Our staff increased to 801 from 681 or 17.62% between fiscal 2018 and 2017 and increased to 681 from 647 or 5.26% between fiscal 2017 and 2016.~~

~~Data processing and internet expense increased $4.1 million, primarily due to enhancements to customer interfaces and the Bank’s core processing system.~~

~~Advertising and promotion expense increased $6.1 million, primarily due to additional lead generation costs, increased deposit marketing and rebranding costs.~~

~~Depreciation and amortization, increased $2.5 million primarily due to depreciation on lending platform enhancements and infrastructure development and amortization of intangibles.~~

~~Occupancy and equipment expense increased $0.5 million, in order to support increased production and office space for additional employees.~~

~~Professional services, which include accounting and legal fees, increased $0.3 million in fiscal 2018 compared to 2017. The~~an increase in professional services ~~was primarily~~of $2.1 million due to ~~increased~~an increase in legal ~~expenses, partially offset by increased insurance reimbursements.~~expenses.

The change in our cost of Federal Deposit Insurance Corporation (“FDIC”) and OCC standard regulatory charges increased by $0.5 million in fiscal 2018 compared to fiscal 2017. The overall growth of the Bank’s liabilities has been offset by the generally favorable change in the FDIC deposit insurance premium calculation. As an FDIC-insured institution, the Bank is required to pay deposit insurance premiums to the FDIC.

~~General and administrative expenses increased by $3.4 million in fiscal 2018 compared to 2017. The increases were primarily due to costs to support loan and deposit production.~~

~~Income Tax Expense~~. Income tax expense was $87.3 million for the fiscal year ended June 30, 2018 compared to $98.0 million for fiscal 2017. Our effective tax rates were 36.42% and 42.10% for the fiscal year ended June 30, 2018 and 2017, respectively.

~~As a result of legislation commonly referred to~~Selected information concerning Axos Clearing LLC follows as the Tax Cuts and Jobs Act (the “Tax Act”) that was enacted on December 22, 2017, during the quarter ended December 31, 2017, the Company revised its estimated annual effective rate to reflect a change in the federal statutory rate from 35.0% to 21.0%. The Tax Act makes broad and complex changes to the U.S. tax code that will affect our fiscal year ending June 30, 2018, including reducing the U.S. federal corporate statutory tax rate to 21.0% beginning January 1, 2018, which results in a blended federal corporate statutory tax rate of 28.1% for the Company’s fiscal year ending June 30, 2018 that is based on the applicable tax rates before and after the Tax Act and the number of days in the fiscal year.

During the quarter ended December 31, 2017, the Company revalued the deferred tax balance to reflect the new corporate tax rate, which resulted in a decrease in net deferred tax assets of $9.2 million. As a result, income tax expense reported for the

~~fiscal year ended June 30, 2018 was adjusted to reflect the effects of the change in the tax law and the application of the newly enacted rates to existing deferred balances.~~

~~Additionally, the Company received tax credits~~or for the year ended June 30, 2018. These tax credits reduced the effective tax rate by approximately 2.38%. Lastly, the Company adopted ASU 2016-09 effective July 1, 2017. As a result of the adoption, the Company recorded $2.4 million of income tax benefits for the fiscal year ended June 30, 2018, respectively, related to excess tax benefits from stock compensation. Prior to 2018, such excess tax benefits were generally recorded directly in stockholders’ equity. This new accounting standard may potentially increase the volatility in the Company’s effective tax rates.ended:


	June 30,
(Dollars in thousands)	2021			2020
Compensation as a % of net revenue	32.4		%	39.2		%
FDIC insured program balances (end of period)	$	730,248		$	450,251
Customer margin balances (end of period)	$	327,148		$	206,702
Customer funds on deposit, including short credits (end of period)	$	322,153		$	194,042

Clearing:
Total tickets	2,053,362			1,228,635
Correspondents (end of period)	69			61

Securities lending:
Interest-earning assets – stock borrowed (end of period)	$	619,088		$	222,368
Interest-bearing liabilities – stock loaned (end of period)	$	728,988		$	255,945

COMPARISON OF FINANCIAL CONDITION AT JUNE 30, ~~2019~~2022 AND JUNE 30, ~~2018~~2021

Our total assets increased ~~$1,680.7 million,~~$3.1 billion, or ~~17.6%~~22.0%, to ~~$11,220.2 million,~~$17.4 billion, as of June 30, ~~2019,~~2022, up from ~~$9,539.5 million~~$14.3 billion at June 30, ~~2018.~~2021. The loan ~~and lease~~ portfolio increased ~~$949.8 million~~$2.7 billion on a net basis, primarily from portfolio loan ~~and lease~~ originations ~~and purchases~~ of ~~$6,945.3 million~~$10.4 billion, less principal repayments and other adjustments of ~~$5,995.5 million.Investment securities~~$7.7 billion. Total cash increased ~~$47.2 million~~by $0.5 billion primarily due to ~~purchases, partially offset by repayments and sales.~~ increased deposits.Total liabilities increased by ~~$1,568.2 million~~$2.9 billion or ~~18.3%~~22.5%, to ~~$10,147.2 million~~$15.8 billion at June 30, ~~2019,~~2022, up from ~~$8,579.0 million~~$12.9 billion at June 30, ~~2018.~~2021. The increase in total liabilities resulted primarily from growth in deposits of ~~$997.8 million, consumer, broker-dealer and clearing payables of $238.6 million, and~~$3.1 billion, partially offset by decreased securities loaned of ~~$198.4 million.~~

$0.3 billion and decreased advances from the Federal Home Loan Bank of $0.2 billion. Stockholders’ equity increased by ~~$112.5~~$242.0 million, or ~~11.7%~~17.3%, to ~~$1,073.1 million~~$1.6 billion at June 30, ~~2019,~~2022, up from ~~$960.5 million~~$1.4 billion at June 30, ~~2018.~~2021. The

increase was largely the result of ~~$155.1~~$240.7 million in net income for the fiscal year, ~~$13.5~~$6.8 million vesting and issuance of RSUs and stock-based compensation expense, partially offset by ~~$56.4 million in stock repurchases, $0.6~~a $5.4 million unrealized ~~gain~~loss in other comprehensive income, net of tax, and $0.3 million in dividends declared on preferred stock. On March 17, 2016, the Board of Directors of the Company, authorized a program to repurchase up to $100.0 million of common stock. As of June 30, 2019, the Company has repurchased a total of $91.6 million, or 3,242,843 common shares at an average price of $28.25 per share with $8.4 million remaining under the 2016 board authorized stock repurchase program. On August 2, 2019, the Board of Directors of the Company authorized an additional program to repurchase up to $100 million of AX common stock. This share repurchase authorization is intax.

USE OF NON-GAAP FINANCIAL MEASURES

In addition to the ~~existing~~results presented in accordance with GAAP, this report includes non-GAAP financial measures such as adjusted earnings, adjusted earnings per common share, ~~repurchase plan~~ and ~~has similar characteristics.~~tangible book value per common share. Non-GAAP financial measures have inherent limitations, may not be comparable to similarly titled measures used by other companies and are not audited. Readers should be aware of these limitations and should be cautious as to their reliance on such measures. Although we believe the non-GAAP financial measures disclosed in this report enhance investors’ understanding of our business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.

We define “adjusted earnings” as net income without the after-tax impact of non-recurring acquisition-related costs (including amortization of intangible assets related to acquisitions), and other costs (unusual or nonrecurring charges). Adjusted earnings per diluted common share (“adjusted EPS”) is calculated by dividing non-GAAP adjusted earnings by the average number of diluted common shares outstanding during the period. We believe the non-GAAP measures of adjusted earnings and adjusted EPS provide useful information about the Company’s operating performance. We believe excluding the non-recurring acquisition related costs, and other costs provides investors with an alternative understanding of Axos’ business.

Below is a reconciliation of net income, the nearest compatible GAAP measure, to adjusted earnings and adjusted EPS (Non-GAAP) for the periods shown:


	For Year Ended June 30,
(Dollars in thousands, except per share amounts)	2022		2021		2020
Net income	$	240,716	$	215,707	$	183,438
Acquisition-related costs	11,355		9,826		10,108

Other costs1	10,975		—		—
Tax effect of adjustments	(6,519)		(2,894)		(3,048)
Adjusted earnings (Non-GAAP)	$	256,527	$	222,639	$	190,498
Adjusted EPS (Non-GAAP)	$	4.23	$	3.68	$	3.10

1 Primarily one-time resolution of a contractual claim.

We define “tangible book value,” as book value adjusted for goodwill and other intangible assets. Tangible book value is calculated using common stockholders’ equity minus mortgage servicing rights, goodwill and other intangible assets. Tangible book value per common share is calculated by dividing tangible book value by the common shares outstanding at the end of the period. We believe tangible book value per common share is useful in evaluating the Company’s capital strength, financial condition, and ability to manage potential losses. Other costs for the year ended June 30, 2022 relate to resolution of a contractual claim and a legal charge, neither of which are indicative of normal operating costs of the core business.

Below is a reconciliation of total stockholders’ equity, the nearest compatible GAAP measure, to tangible book value (Non-GAAP) as of the dates indicated:


	At the Fiscal Years Ended June 30,
(Dollars in thousands, except per share amounts)	2022		2021		2020
Total stockholders’ equity	$	1,642,973	$	1,400,936	$	1,230,846
Less: preferred stock	—		—		5,063
Common stockholders’ equity	1,642,973		1,400,936		1,225,783
Less: mortgage servicing rights, carried at fair value	25,213		17,911		10,675
Less: goodwill and intangible assets	156,405		115,972		125,389
Tangible common stockholders’ equity (Non-GAAP)	$	1,461,355	$	1,267,053	$	1,089,719
Common shares outstanding at end of period	59,777,949		59,317,944		59,612,635
Tangible book value per common share (Non-GAAP)	$	24.45	$	21.36	$	18.28

ASSET QUALITY AND ALLOWANCE FOR ~~LOAN AND LEASE~~CREDIT LOSSES

- LOANS

Non-performing loans ~~and leases~~ and foreclosed assets or “non-performing assets” consisted of the following:

At June 30,
(Dollars in thousands) 2019 2018 2017 2016 2015
Non-performing assets:
Non-accrual loans and leases:
Single family real estate secured:
Mortgage $ 46,005
$ 28,446
$ 23,377
$ 28,400
$ 22,842
Home equity —
16
16
33
9
Multifamily real estate secured 2,108
232
4,255
2,218
5,399
Commercial real estate secured —
—
—
254
2,128
Total non-accrual loans secured by real estate 48,113
28,694
27,648
30,905
30,378
Auto and recreational vehicle secured 115
60
157
278
453
Commercial & Industrial —
2,361
314
—
—
Other 216
111
274
676
—
Total non-performing loans and leases 48,444
31,226
28,393
31,859
30,831
Foreclosed real estate 7,449
9,385
1,353
207
1,225
Repossessed vehicles 36
206
60
45
15
Total non-performing assets $ 55,929
$ 40,817
$ 29,806
$ 32,111
$ 32,071
Total non-performing loans and leases as a percentage of total loans and leases 0.51 % 0.37 % 0.38 % 0.50 % 0.62 %
Total non-performing assets as a percentage of total assets 0.50 % 0.43 % 0.35 % 0.42 % 0.55 %


	At June 30,
(Dollars in thousands)	2022			2021			2020
Non-performing assets:
Non-accrual loans:
Single Family - Mortgage & Warehouse	$	66,424		$	105,708		$	84,030
Multifamily and Commercial Mortgage	33,410			20,428			3,425
Commercial Real Estate	14,852			15,839			—


Total non-accrual loans secured by real estate	114,686			141,975			87,455
Commercial & Industrial - Non-RE	2,989			2,942			213
Auto & Consumer	439			278			273

Other	80			—			—
Total non-performing loans	118,194			145,195			87,941
Foreclosed real estate	—			6,547			6,114
Repossessed vehicles	798			235			294
Total non-performing assets	$	118,992		$	151,977		$	94,349
Total non-performing loans as a percentage of total loans	0.83		%	1.26		%	0.82		%
Total non-performing assets as a percentage of total assets	0.68		%	1.10		%	0.68		%

Our non-performing assets ~~increased~~decreased to ~~$55.9~~$119.0 million at June 30, ~~2019~~2022 from ~~$40.8~~$152.0 million at June 30, ~~2018.~~2021. The decrease in non-performing assets during the fiscal year ended June 30, 2022 was substantially comprised of a decrease in non-performing loans of $27.0 million. Non-performing assets as a percentage of total assets decreased to 0.68% at June 30, 2022 from 1.10% at June 30, 2021. The increase in non-performing assets during the fiscal year ended June 30, ~~2019~~2021 compared to June 30, 2020 was ~~substantially~~ comprised of an increase in non-performing loans ~~and leases~~ of ~~$17.2~~$57.3 million. ~~Non-performing assets as a percentage of total assets increased to 0.50%~~

The decrease in non-performing loans at June 30, 2019 from 0.43% at June 30, 2018. The increase in non-performing assets during the fiscal year ended June 30, 2018 compared to June 30, 2017 was comprised of a increase in foreclosed real estate of $8.0 million and an increase in non-performing loans and leases of $2.8 million.

~~The increase in non-performing loans and leases~~2022 is primarily the result of ~~increased~~the resolution of challenges incurred by single family ~~residential real estate secured loans during the year ended June 30, 2019, partially offset~~borrowers impacted by a decrease in non-performing commercial and industrial loans. The increase in non-performing loans and leases as a percentage of total loans and leases is the result of a small number of well secured real estate backed loans.COVID-19. Approximately ~~94.97%~~56.2% of the Bank’s ~~non-performing~~nonaccrual loans ~~and leases~~ are single family first mortgages that ~~carry in~~have an aggregate ~~a loan to original appraisal value~~loan-to-value ratio of ~~the underlying properties of 44.94%~~58.2%.

At June 30, 2019, our $46.0 million in single family non-performing loans represents 60 loans in 17 states ranging in amount from $9,000 to $5.0 million. At June 30, 2018, our $28.4 million in single family non-performing loans represents 47 loans in 17 states ranging in amount from $9,000 to $5.0 million. The Bank has already taken impairment charge-offs of $2.2 million on the non-performing single family loans at June 30, 2019. Our $2.1 million in multifamily non-performing loans represents three loans in two states at June 30, 2019, with impairment charge-offs taken in the amount of $0.0 million. At June 30, 2018 the $0.2 million of non-performing multifamily loans represented one loan in one state, with impairment charge-offs taken in the amount of $0.1 million. At June 30, 2018 and 2019, we had no non-performing commercial real estate loans.

The $115,000 in non-performing automobile and recreational vehicle (“RV”) loans represents 11 loans ranging in amount from $1,000 to $26,000 at June 30, 2019. The $60,000 in non-performing automobile and RV loans represented 7 loans ranging in amount from $1,000 to $21,000 at June 30, 2018. Foreclosed real estate of $7.4 million at June 30, 2019 represents three single family properties. Foreclosed real estate of $9.4 million at June 30, 2018 represented three single family properties. All foreclosed real estate is measured at the lower of carrying value or fair value less costs to sell. Repossessed vehicles of $36,000 includes eighteen vehicles with fair values ranging in amount from $1 to $26,000 at June 30, 2019, compared to $206,000 at June 30, 2018, which includes twenty-two vehicles with fair values ranging in amount from $1 to $28,000. Impaired loans are generally adjusted through charge-offs against the allowance for loan and lease losses.

The $216,000 in non-performing other loans represents thirteen loans ranging in amount from $10,000 to $28,000 at June 30, 2019, compared to $111,000 at June 30, 2018 which includes seven loans ranging in amount from $9,000 to $23,000.

We ~~have experienced growth in our non-performing single family mortgage loans over the last five years; however, we~~ believe that the write-downs taken as of June 30, ~~2019~~2022 on ~~these~~ non-performing loans and the low average LTVs on the balance of ~~our single family mortgage~~ real estate loans in our portfolio make our future risk of loss better than other banks with significant exposure to real estate loans. If average nationwide residential housing values and commercial real estate values decline or if nationwide unemployment increases, we are likely to experience growth in the level of our non-performing loans and leases, foreclosed real estate and repossessed vehicles in future periods.

Allowance for ~~Loan and Lease~~Credit Losses - Loans. ~~We maintain an allowance~~

On July 1, 2020, the Company adopted ASC 326. The update replaces the historical incurred loss model to a current expected loss model. Refer to Note 1 - Summary of Significant Accounting Policies within this Form 10-K for ~~loan and lease losses in an amount that we believe is sufficient to provide adequate protection against probable incurred losses in our loan and lease portfolio. We evaluate quarterly~~further detail on the ~~adequacy~~accounting adoption along with detail of the allowance based upon reviews of individual loans and leases, recent loss experience, current economic conditions, risk characteristics of the various categories of loans and leases and other pertinent factors. The evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as more information becomes available. The allowance is increased by the provision for loan and lease losses, which is charged against current period operating results. The allowance is decreased by the amount of charge-offs of loans and leases deemed uncollectible and increased by recoveries of loans and leases previously charged off.

The allowance for loan and lease losses includes general reserves and may include specific reserves. Specific reserves may be provided for impaired loans considered TDRs. All other impaired loans and leases are written down through charge-offs to their realizable value. A loan or lease is measured for impairment generally two different ways. If the loan or lease is primarily dependent upon the borrower to make payments, then impairment is calculated by comparing the present value of the expected future payments discounted at the effective interest rate to the carrying value of the loan or lease. If the loan or lease is collateral dependent, the net proceeds from the sale of the collateral is compared to the carrying value of the loan or lease. If the calculated amount is less than the carrying value of the loan or lease, the loan or lease has impairment.

~~A general reserve is included~~processes involved in determining the allowance for ~~loan and lease~~credit losses ~~and is determined by adding~~under the results of a quantitative and a qualitative analysis to all other loans and leases not measured for impairment at the reporting date. The quantitative analysis determines the Bank’s actual annual historic charge-off rates and applies the average historic rates to the outstanding loan and lease balances in each pool, the product of which is the general reserve amount. The qualitative analysis considers one or more of the following factors: changes in lending policies and procedures, changes in economic conditions, changes in the content of the portfolio, changes in lending management, changes in the volume of delinquency rates, changes to the scope of the loan and lease review system, changes in the underlying collateral of the loans and leases, changes in credit concentrations and any changes in the requirements to the credit loss calculations. A loss rate is estimated and applied to those loans and leases affected by the qualitative factors.

The assessment of the adequacy of the Company’s allowance for loan and lease losses is based upon a range of quantitative and qualitative factors, including levels and trends of past due and nonaccrual loans and leases, change in volume and mix of loans and leases, collateral values and charge-off history.

The Company provides general loan loss reserves for its auto and RV loans based upon the borrower credit score at the time of origination and the Company’s loss experience to date. The Company obtains updated credit scores for its auto and RV borrowers approximately every six months. The updated credit score will result in a higher or lower general loan loss allowance depending on the change in borrowers’ FICO scores and the resulting shift in loan balances among the five FICO bands from which the Company measures and calculates its reserves. For the general loss reserve, the Company does not use individually updated credit scores or valuations for the real estate collateralizing its real estate loans.

The allowance for loan and lease losses for the auto and RV loan portfolio at June 30, 2019 was determined by classifying each outstanding loan according to the original FICO score and providing loss rates. The Company had $290,779 (dollars in thousands) of auto and RV loan balances subject to general reserves as follows: FICO greater than or equal to 770: $129,836; 715 – 769: $106,966; 700 – 714: $29,491; 660 – 699: $22,169 and less than 660: $2,317.

The Company provides general loan loss reserves for mortgage loans based upon the size and class of the mortgage loan and the loan-to-value ratio (“LTV”) at date of origination. The allowance for each class is determined by stratifying the outstanding unpaid balance for each loan by the LTV and applying a loss rate. At June 30, 2019, the LTV groupings for each significant mortgage class were as follows (dollars in thousands):

The Company had $4,232,817 of single family mortgage portfolio loan balances subject to general reserves as follows: LTV less than or equal to 60%: $2,453,398; 61% – 70%: $1,339,076; 71% – 80%: $439,268; and greater than 80%: $1,075.

The Company had $1,946,405 of multifamily mortgage portfolio loan balances subject to general reserves as follows: LTV less than or equal to 55%: $999,879; 56% – 65%: $613,655; 66% – 75%: $322,364; 76% – 80%: $9,307 and greater than 80%: $1,200. During the quarter ended March 31, 2011, the Company divided the LTV analysis into two classes, separating the purchased loans from the loans underwritten directly by the Company.

Based on historical performance, the Company concluded that multifamily loans originated by the Bank require lower estimated loss rates than multifamily loans purchased. In fiscal years 2002 through 2004 the Company originated $137 million of primarily 30-year multifamily mortgage loans using the same basic underwriting criteria and accounting for 20%, 25% and 19% of the total average balance of the loan portfolio for fiscal year 2004, 2003 and 2002, respectively. The Company intentionally slowed its multifamily and single family origination volume in 2005 through 2009 based upon the overall loosening of credit standards by competitors and the economic downturn. Since 2009, the economy has stabilized and competitive underwriting standards have strengthened allowing the Company to resume its originations. Since 2014, our weighted average of multifamily loans is equal to 21.6% of the total loan portfolio. For these reasons, the Company believes that its historical underwriting experience originating multifamily loans allows the Company to use its historical loss rate as a reasonable indicator of risk. The historic loss or quantitative component of the Company’s general loan loss allowance is supplemented with a qualitative factor including a volume-based adjustment. At June 30, 2019 and June 30, 2018, all of the qualitative components of the general loan loss allowance for multifamily loans accounted for 100% and 100% of the total multifamily allowance, respectively.

The Bank originates and purchases mortgage loans with terms that may include repayments that are less than the repayments for fully amortizing loans, including interest only loans, option adjustable-rate mortgages, and other loan types that permit payments that may be smaller than interest accruals. The Bank’s lending guidelines for interest only loans are adjusted for the increased credit risk associated with these loans by requiring borrowers with such loans to borrow at LTVs that are lower than standard amortizing ARM loans and by calculating debt to income ratios for qualifying borrowers based upon a fully amortizing payment, not the interest only payment. The Company’s Credit Committee monitors and performs reviews of interest only loans. Adverse trends reflected in the Company’s delinquency statistics, grading and classification of interest only loans would be reported to management and the Board of Directors. As of June 30, 2019, the Company had $1.3 billion of interest only loans and $1.6 million of option ARM mortgage loans. Through June 30, 2019, the net amount of deferred interest on these loan types was not material to the financial position or operating results of the Company.

The Company had $326,154 of commercial real estate loan balances subject to general reserves as follows: LTV less than or equal to 50%: $168,706; 51% – 60%: $75,861; 61% – 70%: $59,442; 71% – 80%: $22,145 and greater than 80%: $0.

The Company’s commercial secured portfolio consists of business loans well-collateralized by real estate. The Company’s other portfolio consists of receivables factoring for businesses and consumers. The Company allocates its allowance for loan and lease losses for these asset types based on qualitative factors which consider the value of the collateral and the financial position of the issuer of the receivables.

We believe the weighted average LTV percentage at June 30, 2019 of 55.50% for our entire real estate loan portfolio is lower and more conservative than most banks which has resulted, and is expected to continue to result in the future, in lower average mortgage loan charge-offs when compared to the real estate loan portfolios of other comparable banks.

~~Seasonal fluctuations in the~~ new guidance.~~Other~~ loan classification and its associated allowance for loan and lease losses primarily relate to tax season H&R Block-related loan products. These products are generally short term in nature, in that they are intended to be repaid within a few weeks or months of origination; if they are not repaid timely, they are generally charged off in their entirety at 120 days delinquent, consistent with regulatory guidance for unsecured consumer loan products. The Company provides general loan loss reserves for its H&R Block-related loans based upon prior years’ loss experience with consideration for current year loan performance. The increase in provision for loan and lease losses in the ~~Other~~ loan classification from $17.1 million to $17.8 million for the fiscal year ended June 30, 2018 and 2019, the increase in charge-offs from $14.6 million to $16.6 million for the fiscal year ended June 30, 2018 and 2019 and the increase in allowance transfers to held-for-sale from $2.3 million to $2.4 million for the fiscal year ended June 30, 2018 and 2019 were primarily due to the increase in Refund Advance loan fundings from $1.1 billion to $1.2 billion during the quarters ended March 31, 2018 and March 31, 2019, respectively, as well as the Company’s continued funding of Emerald Advance loans. During fiscal 2019 the Company was the sole provider of the Refund Advance product. The increase in provision for loan and lease losses in the ~~Other~~ loan classification from $5.3 million to $17.1 million for the fiscal year ended June 30, 2017 and 2018, respectively, and the increase in charge-offs from $3.5 to $14.6 million for the fiscal year ended June 30, 2017 and 2018 were primarily due to the increase in Refund Advance loan fundings from $0.3 billion to $1.1 billion during the quarters ended March 31, 2017 and March 31, 2018, respectively, as well as the Company’s continued funding of Emerald Advance loans. The increase in provision for loan and lease losses in the ~~Other~~ loan classification from $2.8 million to $5.3 million for the fiscal year ended June 30, 2016 and 2017, respectively, and the increase in charge-offs from $0 to $3.5 million for the fiscal year ended June 30, 2016 and 2017 were primarily due to the Company’s participation in the Refund Advance loan program during which $0.3 billion of loans were purchased during the quarter ended March 31, 2017, as well as its continued funding of Emerald Advance loans. There is no long-term impact on the loan and lease portfolio credit quality, because substantially all of the tax season H&R Block-related loan products are either collected, charged-off or sold by the end of the Company’s fiscal year. While they do incur higher proportional default and charge-off rates than the remainder of the Company’s loan and lease portfolio, these asset quality attributes are within expectations of the design of the products.

The following table sets forth the changes in our allowance for ~~loan and lease~~credit losses, by portfolio class for the dates indicated:

Single Family Real Estate Secured:
(Dollars in thousands) Mortgage Home
Equity Warehouse and Other Multi-family Real Estate Secured Commercial
Real Estate
Secured Auto and RV Secured Factoring Commercial & Industrial Other Total Total Allowance
as a % of Total
Loans
Balance at June 30, 2014 $ 7,959
$ 134
$ 1,259
$ 3,785
$ 1,035
$ 812
$ 279
$ 3,048
$ 62
$ 18,373
0.51 %
Provision for loan losses 6,305
(1 ) 620
922
224
288
13
2,834
(5 ) 11,200

Charge-offs (747 ) (43 ) —
(344 ) (156 ) (271 ) —
—
—
(1,561 )
Recoveries 147
32
—
—
—
124
—
—
12
315

Balance at June 30, 2015 13,664
122
1,879
4,363
1,103
953
292
5,882
69
28,327
0.57 %
Provision for loan and lease losses 5,040
(134 ) 806
(311 ) (1,056 ) 854
(47 ) 1,748
2,800
9,700

Charge-offs (205 ) (3 ) —
(114 ) (147 ) (339 ) —
—
—
(808 )
Transfers to held for sale —
—
—
—
—
—
—
—
(2,727 ) (2,727 )
Recoveries 167
38
—
—
982
147
—
—
—
1,334

Balance at June 30, 2016 18,666
23
2,685
3,938
882
1,615
245
7,630
142
35,826
0.56 %
Provision for loan and lease losses 2,308
(6 ) (387 ) 323
110
990
156
2,251
5,316
11,061

Charge-offs (1,115 ) (23 ) —
—
(23 ) (433 ) —
—
(3,502 ) (5,096 )
Transfers to held for sale —
—
—
—
—
—
—
—
(1,828 ) (1,828 )
Recoveries 113
25
—
377
39
207
—
—
108
869

Balance at June 30, 2017 19,972
19
2,298
4,638
1,008
2,379
401
9,881
236
40,832
0.55 %
Provision for loan and lease losses 632
(18 ) 69
372
(159 ) 1,390
44
6,357
17,113
25,800

Charge-offs (271 ) (1 ) (287 ) —
—
(803 ) —
—
(14,617 ) (15,979 )
Transfers to held for sale —
—
—
—
—
—
—
—
(2,307 ) (2,307 )
Recoveries 35
14
—
—
—
212
—
—
544
805

Balance at June 30, 2018 20,368
14
2,080
5,010
849
3,178
445
16,238
969
49,151
0.58 %
Provision for loan and lease losses 1,317
(12 ) 4,247
(1,022 ) 195
2,605
(112 ) 2,286
17,846
27,350

Charge-offs (799 ) —
—
—
—
(1,156 ) —
(1,149 ) (16,559 ) (19,663 )
Transfers to held for sale —
—
—
—
—
—
—
—
(2,356 ) (2,356 )
Recoveries 396
11
—
109
—
191
—
—
1,896
2,603

Balance at June 30, 2019 $ 21,282
$ 13
$ 6,327
$ 4,097
$ 1,044
$ 4,818
$ 333
$ 17,375
$ 1,796
$ 57,085
0.60 %

At ~~June 30, 2019~~, the entire allowance for loan and lease losses for each portfolio class was calculated as a contingent impairment (ASC 450, Contingencies for Gain and Loss). When specific loan and lease impairment analysis is performed under ASC 310-10, the impairment is either recorded as a charge-off to the loan and lease loss allowance or, if such loan is a TDR, the impairment is recorded as a specific loan and lease loss allowance.


(Dollars in thousands)	Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Auto & Consumer		Commercial & Industrial - Non-RE		Other		Total		Total Allowance as a % of Total Loans










Balance at June 30, 2019	$	22,290	$	3,807	$	14,632	$	6,339	$	9,544	$	473	$	57,085	0.60	%
Provision for credit losses	3,546		793		6,420		7,429		4,542		19,470		42,200
Charge-offs	(203)		—		—		(5,047)		(4,132)		(16,451)		(25,833)

Recoveries	266		119		—		741		—		1,229		2,355
Balance at June 30, 2020	25,899		4,719		21,052		9,462		9,954		4,721		75,807		0.71	%
Effect of Adoption of ASC 326	6,318		7,408		25,893		610		7,042		29		47,300
Provision for credit losses	(3,242)		1,196		11,238		(1,354)		14,251		1,661		23,750
Charge-offs	(2,502)		(177)		(255)		(3,517)		(2,833)		(7,274)		(16,558)

Recoveries	131		—		—		1,318		46		1,164		2,659
Balance at June 30, 2021	26,604		13,146		57,928		6,519		28,460		301		132,958		1.15	%
Provision for credit losses	(7,009)		1,332		11,411		10,492		2,544		(270)		18,500
Charge-offs	(82)		—		—		(4,024)		(322)		—		(4,428)

Recoveries	157		177		—		1,127		126		—		1,587
Balance at June 30, 2022	$	19,670	$	14,655	$	69,339	$	14,114	$	30,808	$	31	$	148,617	1.04	%

The following table sets forth our allowance for ~~loan and lease~~credit losses by portfolio class:

At June 30,
2019 2018 2017 2016 2015
(Dollars in thousands)
Amount of
Allowance

Loan
Category
as a %
of Total
Loans

Amount of
Allowance
Loan
Category
as a %
of Total
Loans
Amount of
Allowance
Loan
Category
as a %
of Total
Loans
Amount of
Allowance
Loan
Category
as a %
of Total
Loans
Amount of
Allowance
Loan
Category
as a %
of Total
Loans
Single family real estate secured:
Mortgage $ 21,282
45.3 % $ 20,368
49.3 % $ 19,972
52.4 % $ 18,666
57.5 % $ 13,664
59.6 %
Home equity 13
— % 14
— % 19
— % 23
— % 122
0.1 %
Warehouse & Other 6,327
8.7 % 2,080
4.8 % 2,298
6.1 % 2,685
8.4 % 1,879
7.7 %
Multifamily real estate secured 4,097
20.6 % 5,010
21.1 % 4,638
21.7 % 3,938
21.5 % 4,363
23.7 %
Commercial real estate secured 1,044
3.4 % 849
2.6 % 1,008
2.2 % 882
1.9 % 1,103
1.2 %
Auto & RV secured 4,818
3.1 % 3,178
2.5 % 2,379
2.1 % 1,615
1.2 % 953
0.3 %
Factoring 333
1.0 % 445
2.1 % 401
2.1 % 245
1.5 % 292
2.4 %
Commercial & Industrial 17,375
17.5 % 16,238
17.4 % 9,881
13.3 % 7,630
8.0 % 5,882
5.0 %
Other 1,796
0.4 % 969
0.2 % 236
0.1 % 142
— % 69
— %
Total $ 57,085
100.0 % $ 49,151
100.0 % $ 40,832
100.0 % $ 35,826
100.0 % $ 28,327
100.0 %


	At June 30,
	2022				2021				2020
(Dollars in thousands)	Amount of Allowance		Loan Category as a % of Total Allowance		Amount of Allowance		Loan Category as a % of Total Allowance		Amount of Allowance		Loan Category as a % of Total Allowance
Single Family - Mortgage & Warehouse	$	19,670	13.2	%	$	26,604	20.0	%	$	25,899	34.2	%
Multifamily and Commercial Mortgage	14,655		9.9	%	13,146		9.9	%	4,719		6.2	%
Commercial Real Estate	69,339		46.7	%	57,928		43.6	%	21,052		27.8	%
Commercial & Industrial - Non-RE	30,808		20.7	%	28,460		21.4	%	9,954		13.1	%
Auto & Consumer	14,114		9.5	%	6,519		4.9	%	9,462		12.5	%
Other	31		—	%	301		0.2	%	4,721		6.2	%



Total	$	148,617	100.0	%	$	132,958	100.0	%	$	75,807	100.0	%

The Company’s allowance for ~~loan and lease~~credit losses increased ~~$7.9~~$15.7 million or ~~16.1%~~11.8% from June 30, ~~2018~~2021 to June 30, ~~2019.~~2022. As a percentage of the outstanding loan balance, the Company’s ~~loan and lease loss~~ allowance was ~~0.60%~~1.04% at June 30, ~~2019~~2022 and ~~0.58%~~1.15% at June 30, ~~2018.~~2021. Provisions for ~~loan loss~~credit losses were ~~$27.4~~$18.5 million for fiscal ~~2019~~2022 and ~~$25.8~~$23.8 million for fiscal ~~2018.~~2021. The Company’s ~~loan and lease~~credit loss provisions for fiscal ~~2019~~2022 compared to ~~2018 increased~~2021 decreased by ~~$1.6~~$5.3 million ~~as a result~~primarily due to updates in economic and business conditions and loan mix. Provisions for credit losses for fiscal 2022 were primarily comprised of ~~loan~~provisions in Commercial Real Estate and ~~lease portfolio~~Auto & Consumer due to growth ~~and a change~~ in these segments of the loan ~~and lease mix, including~~portfolio.

Net charge-offs during the fiscal year ended June 30, 2022, were $2.8 million, primarily due to the auto & consumer segment. Net-charge-offs in fiscal 2022 decreased compared to fiscal 2021, due to decreases in net charge-offs of $6.1 million in other loans for the fully reserved charge-off of Refund Advance loans, $2.6 million in commercial & industrial - non RE, $2.4 million in single family - mortgage & warehouse, partially offset by an increase in ~~Refund Advance originations.~~net charge-offs of $0.7 million for auto & consumer.

~~Charge-offs, net of recoveries, for fiscal 2019 increased $0.2 million, decreased $0.1 million and remained unchanged~~Net charge-offs for single family - mortgage & warehouse loans increased $2.4 million for fiscal 2021. Net charge-offs for each of multifamily and commercial mortgage and commercial real estate ~~secured~~ loans increased $0.2 million in fiscal 2021, respectively. ~~Charge-offs, net of recoveries,~~Net charge-offs for ~~the~~ auto & ~~RV portfolio increased $0.4~~consumer decreased $2.1 million for fiscal ~~2019. Charge-offs, net of recoveries,~~2021. Net charge-offs for ~~the Other portfolio increased $0.6~~other decreased $9.1 million for fiscal ~~2019. For fiscal 2018~~2021, primarily due to a $6.3 million decrease in Refund Advance charge-offs and a $0.9 million decrease in net ~~of recoveries, decreased $0.8 million, increased $0.4 million and increased $16,000~~charge-offs for ~~single family mortgage, multifamily and commercial real estate secured loans, respectively. Charge-offs, net of recoveries, for the Other portfolio increased $10.7 million for fiscal 2018.~~unsecured consumer loans.

Between June 30, ~~2018~~2021 and ~~2019,~~2022, the Bank’s total allowance for ~~loan and lease~~credit losses as a proportion of the loan ~~and lease~~ portfolio ~~increased 2~~decreased 11 basis points primarily due to ~~a change~~updates in ~~the~~economic and business conditions and loan ~~and lease~~ mix.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity. For Axos Bank, our sources of liquidity include deposits, borrowings, payments and maturities of outstanding loans, sales of loans, maturities or gains on sales of investment securities and other short-term investments. While scheduled loan payments and maturing investment securities and short-term investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. We generally invest excess funds in overnight deposits and other short-term interest-earning assets. We use cash generated through retail deposits, our largest funding source, to offset the cash utilized in lending and investing activities. Our short-term interest-earning investment securities are ~~also~~ used to provide liquidity for lending and other operational requirements.

As an additional source of funds, we have two credit agreements. Axos Bank can borrow up to 40% of its total assets from the FHLB. Borrowings are collateralized by pledging certain mortgage loans and investment securities to the FHLB. Based on loans and securities pledged at June 30, ~~2019,~~2022, we had a total borrowing availability of ~~approximately~~an additional $2.0 billion available immediately ~~which represents a fully collateralized position,~~and an additional $3.9 billion available with additional collateral, for advances from the FHLB for terms up to ten years.

The Bank can ~~also~~ borrow from the discount window at the ~~FRB. FRB~~FRBSF. FRBSF borrowings are collateralized by commercial loans, consumer loans and mortgage-backed securities pledged to the ~~FRB.~~FRBSF. Based on loans and securities pledged at June 30, ~~2019, we~~2022, the Bank had a total borrowing capacity of approximately ~~$1.6~~$2.8 billion, all of which was available for use. At June 30, ~~2019,~~2022, we also had ~~$35.0~~$175.0 million in unsecured federal funds lines of credit with two major banks under which there were no borrowings outstanding.

In the past, ~~we have~~the Bank has used long-term borrowings to fund our loans and to minimize our interest rate risk. Our future borrowings will depend on the growth of our lending operations and our exposure to interest rate risk. We expect to continue to use deposits and advances from the FHLB as the primary sources of funding our future asset growth.

Axos Clearing has ~~a total of $155.0~~$150.0 million uncommitted secured lines of credit available for ~~borrowing as needed.~~borrowing. As of June 30, ~~2019,~~2022, there was ~~$106.8~~$58.4 million outstanding. These credit facilities bear interest at rates based on the Federal Funds rate and borrowings are due upon demand. The weighted average interest rate on the borrowings at June 30, ~~2019~~2022 was ~~3.84%~~2.99%.

Axos Clearing has a ~~$35.0~~$175.0 million committed unsecured line of credit available for limited purpose ~~borrowing.~~borrowing, which includes $100.0 million from Axos Financial, Inc. As of June 30, ~~2019,~~2022, there was ~~none outstanding.~~$53.1 million outstanding after elimination of intercompany balances. This credit facility bears interest at rates based on the Federal Funds rate and borrowings are due upon demand. The unsecured line of credit requires Axos Clearing operate in accordance with specific covenants surrounding capital and debt ratios. Axos Clearing was in compliance of all covenants as of June 30, ~~2019.~~2022.

In December 2004, we completed a transaction that resulted in ~~which we formed a trust and issued $5.0 million of trust-preferred securities. The net proceeds from the offering were used to purchase approximately~~ $5.2 million of junior subordinated debentures offor our company with a stated maturity date of February 23, 2035. ~~The debentures are the sole assets of the trust. The trust preferred securities are mandatorily redeemable upon maturity, or upon earlier redemption as provided in the indenture.~~ We have the right to redeem the debentures in whole (but not in part) on or after specific dates, at a redemption price specified in the indenture plus any accrued but unpaid interest through the redemption date. Interest accrues at the rate of three-month LIBOR plus 2.4%, for a rate of ~~4.92%~~3.90% as of June 30, ~~2019,~~2022, with interest paid ~~quarterly starting in February 2005. We entered into this transaction to provide additional regulatory capital to our Bank to support its growth.~~quarterly.

~~In February 2015, we filed a shelf registration with the SEC which allows us to issue up to $350.0 million through the sale of debt securities, common stock, preferred stock and warrants.~~

In March 2016, weAxos completed the sale of $51.0 million aggregate principal amount of our 6.25% Subordinated Notes due February 28, 2026 (the ~~“Notes”~~“Notes 2026”). We received $51.0 million in gross proceeds as a part of this transaction, before the 3.15% underwriting discount and other offering expenses. The Notes mature on February 28, 2026 and accrue interest at a rate of 6.25% per annum, with interest payable quarterly. The Notes may be redeemed on or afterOn March 31, 2021, ~~which date may be extended~~the Company completed the redemption of $51.0 million aggregate principal amount. The Notes 2026 were redeemed for cash by the Company at ~~the our discretion, at a redemption price equal to~~100% of their principal amount, plus accrued and unpaid interest, ~~subject to certain conditions described~~in accordance with the terms of the indenture governing the Notes 2026. On March 31, 2021, the Company completed the redemption of $51.0 million aggregate principal amount of its Notes 2026. The Notes 2026 were redeemed for cash by the Company at 100% of their principal amount, plus accrued and unpaid interest, in accordance with the terms of the indenture governing the Notes 2026. Remaining unamortized deferred financing costs associated with such notes were expensed and included under Interest Expense - Other Borrowings in the ~~Indenture.~~

In March 2018, we filed a post-effective amendment to deregister all securities unsold under the February 2015 shelf registration and subsequently, we filed a new shelf registration with the SEC which allows us to issue up to $350.0 million through the saleConsolidated Statements of ~~debt securities, common stock, preferred stock and warrants.~~Income.

In January 2019, we issued subordinated notes totaling $7.5 million, to the principal stockholders of COR Securities in an equal principal amount, with a maturity of 15 months, to serve as the ~~sole~~ source of payment of indemnification obligations of the principal stakeholders of COR Securities under the Merger Agreement. Interest accrues at a rate of 6.25% per annum. During the fiscal year ended June 30, 2019, $0.1 million of subordinated loans were repaid. The Company has made an indemnification claim against the $7.4 million remaining.

In September 2020, the Company completed the sale of $175.0 million aggregate principal amount of its 4.875% Fixed-to-Floating Rate Subordinated Notes due October 1, 2030 (the “Notes”). The Notes mature on October 1, 2030 and accrue interest at a fixed rate per annum equal to 4.875%, payable semi-annually in arrears on April 1 and October 1 of each year, commencing on April 1, 2021. From and including October 1, 2025, to, but excluding October 1, 2030 or the date of early redemption, the Notes will bear interest at a floating rate per annum equal to a benchmark rate (which is expected to be the Three-Month Term Secured Overnight Financing Rate) plus a spread of 476 basis points, payable quarterly in arrears on January 1, April 1, July 1 and October 1 of each year, commencing on January 2026. The Notes may be redeemed on or after October 1, 2025, which date may be extended at the Company’s discretion, at a redemption price equal to principal plus accrued and unpaid interest, subject to certain conditions.

In March 2021, we filed a new shelf registration with the SEC which allows us to issue up to $400.0 million through the sale of debt securities, common stock, preferred stock and warrants.

In February 2022, the Company completed the sale of $150.0 million aggregate principal amount of its 4.00% Fixed-to-Floating Rate Subordinated Notes (the “Notes”). The Notes are obligations only of Axos Financial, Inc. The Notes mature on March 1, 2032 and accrue interest at a fixed rate per annum equal to 4.00%, payable semi-annually in arrears on March 1 and September 1 of each year, commencing on September 1, 2022. From and including March 1, 2027, to, but excluding March 1, 2032 or the date of early redemption, the Notes will bear interest at a floating rate per annum equal to a benchmark rate of the Three-Month Term SOFR plus a spread of 2.27 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year, commencing on June 1, 2027. The Notes may be redeemed on or after March 1, 2027, which date may be extended at the Company’s discretion, at a redemption price equal to principal plus accrued and unpaid interest, subject to certain conditions. Fees and costs incurred in connection with the debt offering amortize to interest expense over the term of the Notes.

Off-Balance Sheet Commitments. At June 30, ~~2019,~~2022, we had commitments to originate loans with an aggregate outstanding principal balance of ~~$752.8~~$3,504.3 million, commitments to sell loans with an aggregate outstanding principal balance at the time of sale of ~~$94.2~~$8.4 million, and no commitments to purchase loans, investment securities or any other unused lines of credit. See Item 3. Legal Proceedings for further information on pending litigation in which we are involved.

Contractual Obligations. The Company enters into contractual obligations in the normal course of business primarily as a source of funds for its asset growth and to meet required capital needs. Our time deposits due within one year of June 30, ~~2019~~2022 totaled ~~$1.3~~$0.7 billion. If these maturing deposits do not remain with us, we may be required to seek other sources of funds, including using off-balance sheet deposits managed by Axos Clearing, other time deposits and borrowings. Depending on market conditions, we may be required to pay higher rates on deposits and borrowings than we currently pay on time deposits maturing within one year. We believe, however, based on past experience, that a ~~significant~~ portion of our time deposits will remain with us. We believe we have the ability to attract and retain deposits by adjusting interest rates offered.

The following table presents our contractual obligations for long-term debt, time deposits, and operating leases by payment date:


	At June 30, 2019											At June 30, 2022
	Payments Due by Period											Payments Due by Period
(Dollars in thousands)	Total		Less than One Year		One to Three Years		Three to Five Years		More than Five Years		(Dollars in thousands)	Total		Less than One Year		One to Three Years		Three to Five Years		More than Five Years
Long-term debt obligations^{1, 2}	$	559,832	$	302,104	$	127,629	$	35,486	$	94,613	Long-term debt obligations1, 2	$	704,163	$	163,763	$	63,236	$	31,949	$	445,215
Other obligations3											Other obligations3	28,083		11,160		8,890		6,914		1,119
Time deposits²	2,497,083		1,347,281		490,890		179,278		479,634		Time deposits2	1,068,957		751,156		302,786		15,015		—
Operating lease obligations³	91,834		8,634		17,411		18,288		47,501
Operating lease obligations4											Operating lease obligations4	83,554		10,509		22,018		21,671		29,356
Total	$	3,148,749	$	1,658,019	$	635,930	$	233,052	$	621,748	Total	$	1,884,757	$	936,588	$	396,930	$	75,549	$	475,690

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


	Year Ended June 30,
(Dollars in thousands)	2022		2021		2020
NET INCOME	$	240,716	$	215,707	$	183,438
Net unrealized gain (loss) from available-for-sale securities, net of tax expense (benefit) of $(2,416), $1,495, and $(381) for the years ended June 30, 2022, 2021 and 2020, respectively.	(5,440)		3,444		(953)


Other comprehensive income (loss)	(5,440)		3,444		(953)
COMPREHENSIVE INCOME	$	235,276	$	219,151	$	182,485

Year Ended June 30,
(Dollars in thousands) 2019 2018 2017
NET INCOME $ 155,131
$ 152,411
$ 134,740
Net unrealized gain (loss) from available-for-sale securities, net of tax expense (benefit) of $562, $(2,449), and $3,363 for the years ended June 30, 2019, 2018 and 2017, respectively. 1,741
(5,493 ) 5,218
Other-than-temporary impairment on securities recognized in other comprehensive income, net of tax expense (benefit) of $(251), $1,918 and $3,195 for the years ended June 30, 2019, 2018 and 2017, respectively. (594 ) 4,197
4,957
Reclassification of net (gain) loss from available-for-sale securities included in income, net of tax expense (benefit) of $191, $(104) and $1,536 for the years ended June 30, 2019, 2018 and 2017, respectively. (518 ) 196
(2,384 )
Other comprehensive income (loss) 629
(1,100 ) 7,791
Comprehensive income $ 155,760
$ 151,311
$ 142,531

See accompanying notes to the consolidated financial statements.

AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Preferred Stock Common Stock Additional
Paid-in
Capital Retained
Earnings Accumulated Other Comprehensive Income (Loss), Net of
Income Tax Treasury
Stock Total
Number of Shares
(Dollars in thousands) Shares
Amount
Issued Treasury
Outstanding
Amount

Balance as of June 30, 2016 515
$ 5,063
64,513,494
(1,294,102 ) 63,219,392
$ 645
$ 331,156
$ 384,815
$ (7,304 ) $ (30,785 ) $ 683,590
Net income —
—
—
—
—
—
—
134,740
—
—
134,740
Other comprehensive income (loss) —
—
—
—
—
—
—
—
7,791
—
7,791
Cash dividends on preferred stock —
—
—
—
—
—
—
(309 ) —
—
(309 )
Stock-based compensation expense and restricted stock unit vesting —
—
602,438
(285,586 ) 316,852
6
14,961
—
—
(6,532 ) 8,435
Balance as of June 30, 2017 515
$ 5,063
65,115,932
(1,579,688 ) 63,536,244
$ 651
$ 346,117
$ 519,246
$ 487
$ (37,317 ) $ 834,247
Net income —
—
—
—
—
—
—
152,411
—
—
152,411
Other comprehensive income (loss) —
—
—
—
—
—
—
—
(1,100 ) —
(1,100 )
Cash dividends on preferred stock —
—
—
—
—
—
—
(309 ) —
—
(309 )
Purchase of treasury stock —
—
—
(1,233,491 ) (1,233,491 ) —
—
—
—
(35,183 ) (35,183 )
Stock-based compensation expense and restricted stock unit vesting —
—
680,128
(294,817 ) 385,311
7
20,398
—
—
(9,958 ) 10,447
Balance as of June 30, 2018 515
$ 5,063
65,796,060
(3,107,996 ) 62,688,064
$ 658
$ 366,515
$ 671,348
$ (613 ) $ (82,458 ) $ 960,513
Net income —
—
—
—
—
—
—
155,131
—
—
155,131
Other comprehensive income (loss) —
—
—
—
—
—
—
—
629
—
629
Cash dividends on preferred stock —
—
—
—
—
—
—
(309 ) —
—
(309 )
Purchase of treasury stock —
—
—
(2,009,352 ) (2,009,352 ) —
—
—
—
(56,437 ) (56,437 )
Stock-based compensation expense and restricted stock unit vesting —
—
767,862
(317,757 ) 450,105
8
23,430
—
—
(9,915 ) 13,523
Balance as of June 30, 2019 515
$ 5,063
66,563,922
(5,435,105 ) 61,128,817
$ 666
$ 389,945
$ 826,170
$ 16
$ (148,810 ) $ 1,073,050

F-5

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY


	Preferred Stock			Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Treasury Stock		Total
				Number of Shares
(Dollars in thousands)	Shares	Amount		Issued	Treasury	Outstanding	Amount
Balance as of June 30, 2019	515	$	5,063	66,563,922	(5,435,105)	61,128,817	$	666	$	389,945	$	826,170	$	16	$	(148,810)	$	1,073,050
Net income	—	—		—	—	—	—		—		183,438		—		—		183,438
Other comprehensive income (loss)	—	—		—	—	—	—		—		—		(953)		—		(953)
Cash dividends on preferred stock	—	—		—	—	—	—		—		(309)		—		—		(309)

Purchase of treasury stock	—	—		—	(1,970,464)	(1,970,464)	—		—		—		—		(38,858)		(38,858)


Stock-based compensation expense and restricted stock unit vesting	—	—		759,131	(304,849)	454,282	7		21,928		—		—		(7,457)		14,478

Balance as of June 30, 2020	515	$	5,063	67,323,053	(7,710,418)	59,612,635	$	673	$	411,873	$	1,009,299	$	(937)	$	(195,125)	$	1,230,846
Cumulative effect of change in accounting principle net of tax, adoption of ASU No. 2016-13	—	—		—	—	—	—		—		(37,088)		—		—		(37,088)
Net income	—	—		—	—	—	—		—		215,707		—		—		215,707
Other comprehensive income (loss)	—	—		—	—	—	—		—		—		3,444		—		3,444
Cash dividends on preferred stock	—	—		—	—	—	—		—		(103)		—		—		(103)
Preferred stock - Series A redemption	(515)	(5,063)		—	—	—	—		—		(87)		—		—		(5,150)
Purchase of treasury stock	—	—		—	(753,597)	(753,597)	—		—		—		—		(16,757)		(16,757)


Stock-based compensation expense and restricted stock unit vesting	—	—		746,268	(287,362)	458,906	8		20,677		—		—		(10,648)		10,037

Balance as of June 30, 2021	—	$	—	68,069,321	(8,751,377)	59,317,944	$	681	$	432,550	$	1,187,728	$	2,507	$	(222,530)	$	1,400,936

Net income	—	—		—	—	—	—		—		240,716		—		—		240,716
Other comprehensive income (loss)	—	—		—	—	—	—		—		—		(5,440)		—		(5,440)






Stock-based compensation expense and restricted stock unit vesting	—	—		790,401	(330,396)	460,005	8		21,234		—		—		(14,481)		6,761

Balance as of June 30, 2022	—	$	—	68,859,722	(9,081,773)	59,777,949	$	689	$	453,784	$	1,428,444	$	(2,933)	$	(237,011)	$	1,642,973

See accompanying notes to the consolidated financial statements.

F-6

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


	Year Ended June 30,
(Dollars in thousands)	2022		2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	240,716	$	215,707	$	183,438
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Accretion and amortization on securities, net	(423)		(365)		291
Net accretion of discounts on loans	(7,249)		(7,050)		(35,493)
Amortization of borrowing costs	706		1,569		208
Amortization of operating lease right of use asset	10,899		10,598		10,543
Stock-based compensation expense	21,242		20,685		21,935

Net change in trading activity	225		(1,878)		1,217


Provision for credit losses	18,500		23,750		42,200

Deferred income taxes	(9,400)		(8,828)		(6,551)
Origination of loans held for sale	(656,487)		(1,608,700)		(1,601,579)
Unrealized (gain) loss on loans held for sale	733		1,469		(1,360)
Gain on sales of loans held for sale	(16,970)		(42,641)		(27,517)
Proceeds from sale of loans held for sale	689,530		1,671,515		1,614,379
Amortization and change in fair value of mortgage servicing rights	(2,228)		6,319		5,806
(Gain) loss on sale of other real estate and foreclosed assets	(458)		(201)		(449)
Depreciation and amortization	24,596		24,124		24,443
Increase in cash surrender value of BOLI	(4,220)		(175)		(174)
Net changes in assets and liabilities which provide (use) cash:

Securities borrowed	280,108		(396,720)		(77,662)
Customer, broker-dealer and clearing receivables	(43,925)		(149,549)		(17,074)
Other assets	(102,636)		(7,084)		(36,805)
Securities loaned	(254,588)		473,043		57,589
Customer, broker-dealer and clearing payables	(23,771)		187,811		109,010

Accounts payable and other liabilities	45,382		(817)		17,723
Net cash provided by operating activities	210,282		412,582		284,118
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities	(143,733)		(122,338)		(304,930)

Proceeds from sales of securities	70,751		—		—
Proceeds from repayment of securities	61,117		74,667		325,704
Purchase of stock of regulatory agencies	(54,350)		(305)		(55,870)
Proceeds from redemption of stock of regulatory agencies	54,350		920		55,536
Origination of loans held for investment	(10,325,104)		(5,761,303)		(6,573,568)
Proceeds from sale of loans held for investment	106,324		80,049		37,300
Mortgage warehouse loans activity, net	333,562		(139,806)		(172,319)
Purchases of loans, net of discounts and premiums	(33,085)		(3,619)		—
Principal repayments on loans	7,220,931		5,013,817		5,349,800
Proceeds from sales of other real estate owned and repossessed assets	8,654		1,586		2,241


Acquisition of business activity, net of cash acquired	(54,597)		—		—
Purchases of furniture, equipment, software and intangibles	(21,504)		(10,437)		(12,333)
Net cash used in investing activities	(2,776,684)		(866,769)		(1,348,439)

F-7

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30,
(Dollars in thousands) 2019 2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 155,131
$ 152,411
$ 134,740
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Accretion of discounts on securities (264 ) (624 ) (2,766 )
Net accretion of discounts on loans and leases (30,176 ) (29,381 ) (4,859 )
Amortization of borrowing costs 208
208
208
Stock-based compensation expense 23,439
20,399
14,535
Valuation of financial instruments carried at fair value —
—
(743 )
Net (gain)/loss on sale of investment securities (709 ) 18
(3,920 )
Impairment charge on securities 821
156
1,964
Provision for loan and lease losses 27,350
25,800
11,061
Broker-dealer reserve for bad debt 15,298
—
—
Deferred income taxes (8,686 ) 17,034
(2,220 )
Origination of loans held for sale (1,471,906 ) (1,564,165 ) (1,375,443 )
Unrealized (gain) loss on loans held for sale (252 ) (253 ) 222
Gain on sales of loans held for sale (11,427 ) (19,489 ) (18,771 )
Proceeds from sale of loans held for sale 1,481,911
1,576,353
1,433,068
Change in fair value of mortgage servicing rights 3,362
83
(31 )
(Gain) loss on sale of other real estate and foreclosed assets (283 ) (258 ) (42 )
Depreciation and amortization 16,471
8,574
6,094
Net changes in assets and liabilities which provide (use) cash:
Accrued interest receivable (12,300 ) (6,082 ) 4,511
Securities borrowed 13,192
—
—
Customer, broker-dealer and clearing receivables 13,684
—
—
Other assets (15,264 ) (40,988 ) 807
Securities loaned (4,685 ) —
—
Customer, broker-dealer and clearing payables (1,506 ) —
—
Accrued interest payable 1,129
469
(383 )
Accounts payable and accrued liabilities 9,883
27,650
466
Net cash provided by operating activities 204,421
167,915
198,498
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities (146,886 ) (100,503 ) (249,909 )
Proceeds from sales of securities 15,863
52,714
161,048
Proceeds from repayment of securities 93,779
139,338
307,456
Purchase of stock of regulatory agencies (204,206 ) (33,966 ) (66,294 )
Proceeds from redemption of stock of regulatory agencies 203,611
79,923
60,210
Origination of loans and leases held for investment (6,756,832 ) (5,895,902 ) (4,068,990 )
Proceeds from sale of loans held for investment 119,881
20,719
31,918
Origination of mortgage warehouse loans, net (126,491 ) (26,899 ) (113,711 )
Purchases of loans and leases, net of discounts and premiums (11,525 ) —
(269,886 )
Principal repayments on loans and leases 5,846,349
4,818,558
3,427,818
Proceeds from sales of other real estate owned and repossessed assets 2,202
1,832
367
Cash paid for deposit acquisition (14,747 ) —
—
Cash paid for acquisition —
(70,002 ) —
Acquisition of business activity, net of cash paid 67,343
—
—
Purchases of furniture, equipment and software (20,082 ) (11,817 ) (8,758 )
Net cash used in investing activities (931,741 ) (1,026,005 ) (788,731 )


	Year Ended June 30,
(Dollars in thousands)	2022		2021		2020
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	3,130,625		(520,897)		2,353,521
Proceeds from the Federal Home Loan Bank term advances	—		—		65,000
Repayments of the Federal Home Loan Bank term advances	(50,000)		(70,000)		(55,000)
Net (repayment) proceeds of Federal Home Loan Bank other advances	(186,000)		181,000		(226,000)

Net (repayment) proceeds of other borrowings	75,300		14,700		(85,300)
Redemption of subordinated notes	—		(51,000)		—
Repayment of Paycheck Protection Program Liquidity Facility advances	—		(151,952)		—
Proceeds from Paycheck Protection Program Liquidity Facility advances	—		—		151,952

Tax payments related to settlement of restricted stock units	(14,481)		(10,648)		(7,457)
Repurchase of treasury stock	—		(16,757)		(38,858)




Redemption of preferred stock, Series A	—		(5,150)		—
Cash dividends paid on preferred stock	—		(103)		(386)
Payment of debt issuance costs	(2,120)		(2,748)		—
Proceeds from issuance of subordinated notes	150,000		175,000		—
Net cash provided by (used in) financing activities	3,103,324		(458,555)		2,157,472
NET CHANGE IN CASH AND CASH EQUIVALENTS	536,922		(912,742)		1,093,151
CASH AND CASH EQUIVALENTS—Beginning of year	$	1,037,777	$	1,950,519	$	857,368
CASH AND CASH EQUIVALENTS—End of year	$	1,574,699	$	1,037,777	$	1,950,519
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on interest-bearing liabilities	$	50,269	$	77,995	$	145,452
Income taxes paid	99,701		92,506		80,430
Transfers from loans held for investment to other real estate and repossessed vehicles	2,134		1,903		1,315
Transfers from loans held for investment to loans held for sale	105,884		71,136		141,849
Transfers from loans held for sale to loans held for investment	3,098		29,616		—
Loans held for investment sold, cash not received	—		—		61,029
Securities transferred from available-for-sale portfolio to other assets	—		70,751		17,482
Impact of adoption of ASC 326 on retained earnings	—		37,088		—
Operating lease liabilities for obtaining right of use assets	6,876		—		82,950

AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30,
(Dollars in thousands) 2019 2018 2017
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits $ 997,823
$ 1,085,843
$ 855,456
Repayment of the Federal Home Loan Bank term advances (147,500 ) (30,000 ) (95,000 )
Net proceeds (repayment) of Federal Home Loan Bank other advances 149,000
(153,000 ) 8,000
Net proceeds (repayment) of other borrowings 21,700
(20,000 ) (15,000 )
Tax payments related to settlement of restricted stock units (9,916 ) (9,952 ) (6,532 )
Repurchase of treasury stock (56,437 ) (35,183 ) —
Tax benefit from vesting of restricted stock grants —
—
432
Cash dividends paid on preferred stock (232 ) (309 ) (309 )
Net proceeds from issuance of subordinated notes 7,400
—
—
Net cash provided by financing activities 961,838
837,399
747,047
NET CHANGE IN CASH AND CASH EQUIVALENTS 234,518
(20,691 ) 156,814
CASH AND CASH EQUIVALENTS—Beginning of year $ 622,850
$ 643,541
$ 486,727
CASH AND CASH EQUIVALENTS—End of year $ 857,368
$ 622,850
$ 643,541
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on deposits and borrowed funds $ 152,756
$ 106,112
$ 74,442
Income taxes paid $ 64,117
$ 79,628
$ 102,482
Transfers to other real estate and repossessed vehicles $ 850
$ 10,113
$ 1,982
Transfers from loans and leases held for investment to loans held for sale $ 106,911
$ 31,207
$ 2,935
Transfers from loans held for sale to loans and leases held for investment $ 1,714
$ 3,969
$ 2,790
Loans held for investment sold, cash not received $ —
$ 17,742
$ —
Securities transferred from held-to-maturity to available for sale portfolio $ —
$ —
$ 194,153
Preferred stock dividends declared but not paid $ 77
$ —
$ —

See accompanying notes to the consolidated financial statements.

F-8

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

F-9

AXOS FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED ~~JUNE~~June 30, ~~2019~~, ~~2018~~2022, 2021 AND ~~2017~~

~~(Dollars in thousands, except per share and stated value amounts)~~2020

1. ORGANIZATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation. The ~~consolidated financial statements~~Consolidated Financial Statements include the accounts of Axos Financial, Inc. (“Axos”) and its wholly owned subsidiaries, Axos Bank (the “Bank”) and Axos Nevada Holding, LLC ~~(the “Axos~~(“Axos Nevada Holding” and collectively, the “Company”). Axos Nevada Holding, LLC wholly owns ~~its subsidiary Axos~~the companies constituting the Securities LLC, which wholly owns subsidiaries Axos Clearing LLC (“Axos Clearing”), a clearing broker dealer, WiseBanyan, Inc., a registered investment advisor, and WiseBanyan Securities, LLC, an introducing broker dealer.Business segment. All significant intercompany balances and transactions have been eliminated in consolidation.

Axos Financial, Inc. was incorporated in the State of Delaware on July 6, 1999 for the purpose of organizing and launching an ~~Internet-based~~internet-based savings bank. ~~Axos~~The Bank, ~~(the “Bank”),~~ which opened for business over the ~~Internet~~internet on July 4, 2000, is subject to regulation and examination by the Office of the Comptroller of the Currency (“OCC”), its primary regulator. The Federal Deposit Insurance Corporation (“FDIC”) insures the Bank’s deposit accounts up to the maximum allowable amount. Axos Clearing LLC, a clearing broker dealer, is regulated by the SEC and FINRA. Axos Invest, a platform through which digital investment advisory services are offered to retail investors, is regulated by the SEC and FINRA.

Business. The Company provides banking and securities products and services to its customers through its online and low-cost distribution channels and affinity partners. The Bank’s deposit products are demand accounts, savings and money market accounts, and time deposits marketed to consumers and businesses located in all fifty states. The Bank’s lending products include residential single family mortgage, multifamily mortgage, and commercial mortgage loans. Additionally, the Bank also originates loans secured by commercial real estate properties (“CRE”), loans secured by commercial assets and non-bank lenders (Commercial & Industrial - Non-Real Estate), auto and unsecured loans and other loans. The Bank’s business is primarily concentrated in the State of California and is subject to the general economic conditions of that state. Securities products and services generate interest and fee income by providing comprehensive securities clearing and custody services to introducing broker-dealers and registered investment advisor correspondents and digital investment advisory services to retail investors, respectively.

Use of Estimates. In preparing ~~consolidated financial statements~~the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for ~~loan and lease~~credit losses, ~~the assessment~~credit losses on available for ~~other-than-temporary impairment on investment~~sale debt securities and the fair value of certain financial instruments.

~~Business~~Revenue Recognition. . The Bank provides consumer and business banking products through the online distribution channels and affinity partners. The Bank’s deposit products are demand accounts, savings accounts and time deposits marketed to consumers and businesses located in all fifty states. The Bank’s primary lending products are residential single family and multifamily mortgage loans. The Bank’s business is primarily concentrated in the State of California and is subject to the general economic conditions of that state.

~~Cash and Cash Equivalents~~. The Bank’s cash, due from banks, money market mutual funds and federal funds sold, all of which have original maturities within 90 days, consist of cash and cash equivalents. Net cash flows are reported for customer deposit transactions.

~~Cash segregated for regulatory purposes~~. Federal Reserve Board regulations require depository institutions to maintain certain minimum reserve balances. Included within this are cash balances required by the Federal Reserve Bank of San Francisco of the Bank. In addition this line item includes qualified deposits in special reserve bank accounts for the exclusive benefit of Axos Clearing customers in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934 (the “Exchange Rate”) and other regulations.

~~Interest Rate Risk~~. The Bank’s assets and liabilities are generally monetary in nature and interest rate changes have an effect on the Bank’s performance. The Bank decreases the effect of interest rate changes on its performance by striving to match maturities and interest sensitivity between loans and deposits. A significant change in interest rates could have a material effect on the Bank’s results of operations.

~~Concentration of Credit Risk~~. The Bank’s loan portfolio was collateralized by various forms of real estate with approximately 72.2% of the mortgage portfolio located in California at June 30, 2019. The Bank’s loan portfolio contains concentrations of credit in multifamily, single family, commercial, and home equity loans. The Bank believes its underwriting standards combined with its low LTV requirements substantially mitigate the risk of loss which may result from these concentrations.

~~Brand Partnership Products~~.Through its strategic partnerships division, the Bank has agreements with third-party service providers (“Program Managers”) possessing demonstrated expertise in managing programs involving marketing and processing financial products such as credit, debit, and prepaid cards, and small business and consumer loans. These relationships include the Company’s relationships with H&R Block, Inc., Netspend and BFS Capital, among others. As delineated by the related contracts, a Program Manager provides program management services in its areas of expertise subject to the Bank’s continuing control and active supervision of the subject program. Underwriting standards and credit decisioning remain with the Bank in all cases. Each of these relationships is designed to allow the Bank to leverage the Program Manager’s knowledge and experience to distribute

program-related financial products to a broad and increasing base of customers. With respect to credit products, the Bank generally originates the resulting receivable for sale, but may, in its discretion, retain such receivable. The Bank performs extensive due diligence with respect to each Program Manager and program, and maintains a regimen of comprehensive risk management and strict compliance oversight with respect to all programs.

Through our agreement with H&R Block, Inc. (“H&R Block”) and its wholly-owned subsidiaries the Bank provides H&R Block-branded financial products and services. The products and services that represent the primary focus and the majority of transactional volume that the Bank processes are described in detail below.

~~The first product is Emerald Prepaid Mastercard~~^® services. The Bank entered into agreements to offer this product in August 2015. Under the agreements, the Bank is responsible for the primary oversight and control of the prepaid card programs of a wholly-owned subsidiary of H&R Block. The Bank holds the prepaid card customer deposits for those cards issued under the prepaid programs in non-interest bearing accounts and earns a fixed fee paid by H&R Block’s subsidiary for each automated clearing house (“ACH”) transaction processed through the prepaid card customer accounts. A portion of H&R Block’s customers use the Emerald Card as an option to receive federal and state income tax refunds. The prepaid customer deposits are included in non-interest bearing deposit liabilities on the balance sheet of the Company and the ACH fee income is included in the income statement under the line banking and service fees.

The second product is Refund Transfer. The Bank entered into agreements to offer this product in August 2015. The Bank is responsible for the primary oversight and control of the refund transfer program of a wholly-owned subsidiary of H&R Block. The Bank opens a temporary bank account for each H&R Block customer who is receiving an income tax refund and elects to defer payment of his or her tax preparation fees. After the Internal Revenue Service and any state income tax authorities transfer the refund into the customer’s account, the net funds are transferred to the customer and the temporary deposit account is closed. The Bank earns a fixed fee paid by H&R Block for each of the H&R Block customers electing a Refund Transfer. The fees are earned primarily in the quarters ending March 31st and are included in the income statement under the line banking and service fees.

The third product is Emerald Advance. The Bank entered into agreements to offer this product in August 2015. Under the agreements the Bank is responsible for the underwriting guidelines and credit policies for unsecured consumer lines of credit offered to H&R Block customers. The Bank offers and funds unsecured lines of credit to consumers primarily through the H&R Block tax preparation offices and earns interest income and fee income. The Bank retains 10% of the Emerald Advance and sells the remainder to H&R Block. Emerald Advance is a seasonal product and the was no remaining balance as of June 30, 2019. The lines of credit are included in loans and leases on the balance sheet of the Company and the interest income and fee income are included in the income statement under the line loans and leases interest and dividend income.

The fourth product is an interest-free Refund Advance loan. The Bank exclusively originated and funded all of H&R Block’s interest-free Refund Advance loans to tax preparation clients for the 2019 and 2018 tax seasons. The Bank performed the credit underwriting, loan origination, and funding associated with the interest-free Refund Advance loans in the current tax season and received fees from H&R Block for operating the program. No fee is charged to the tax preparation client. Repayment of the Refund Advance loan is deducted from the client’s tax refund proceeds; if an insufficient refund to repay the Refund Advance loan is received, there is no recourse to the client, no negative credit reporting occurs in respect of the client and no collection efforts are made against the client. This agreement is an expansion of the services Axos provided to H&R Block in the 2017 tax season when the Bank participated through purchases of the loans with other providers in the Refund Advance loan program. During the 2017 tax season, the Bank purchased the Refund Advance loans from a third-party bank at a discount and recorded the accretion of the loan discount as interest income, reported on the income statement under the interest and dividend income line item. During the 2018 tax season, the Bank recorded the fees received from H&R Block as interest income on loans, reported on the income statement under the interest and dividend income line item.

The H&R Block-branded financial services products introduce seasonality into the Company’s quarterly reports on Form 10-Q in the unaudited condensed consolidated income statements through the banking and service fees category of non-interest income and the other general and administrative category of non-interest expense, with the peak income and expense in these categories typically occurring during the Company’s third fiscal quarter ended March 31.

~~Securities~~. Debt securities are classified as held-to-maturity and carried at amortized cost when management has both the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when they might be sold before maturity. Securities available-for-sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. Securities available-for-sale are reported at estimated fair value, with unrealized gains and losses, net of the related tax effects, excluded from operations and reported as a separate component of accumulated other comprehensive income or loss. The fair values of securities traded in active markets are obtained from market quotes. If quoted prices in active markets are not available, we determine the fair values by utilizing industry-standard tools to calculate the net present value of the expected cash flows available to the securities. For securities other than non-agency RMBS, we use observable market participant inputs and categorize these securities as Level II in determining fair value. Trading securities refer to certain types of assets that banks hold for resale at a profit or when the Company elects to account for certain securities at fair value. Increases or decreases in the fair value of trading securities are recognized in earnings as they occur. During the quarter ended September 30, 2016, the Company elected to reclassify all of its held-to-maturity securities to available-for-sale. See Note 4 – “Securities” for further information.

Gains and losses on securities sales are based on a comparison of sales proceeds and the amortized cost of the security sold using the specific identification method. Purchases and sales are recognized on the trade date. Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are amortized or accreted using the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. The Company’s portfolios of available-for-sale securities are reviewed quarterly for other-than-temporary impairment. In performing this review, management considers (1) the length of time and extent that fair value has been less than amortized cost, (2) the financial condition and near term prospects of the issuer, (3) the impact of changes in market interest rates on the market value of the security and (4) how to record an impairment by assessing whether the Company intends to sell it or is more likely than not that it will be required to sell a security in an unrealized loss position before the Company recovers the security’s amortized cost. If either of these criteria for (4) is met, the entire difference between amortized cost and fair value is recognized in earnings. Alternatively, if neither of the criteria for (4) are met, the amount of impairment recognized in earnings is limited to the amount related to credit losses, while impairment related to other factors is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis.

~~Loans and Leases~~. Loans and leases that management has the intent and ability to hold for the foreseeable future or until maturity are reported at the principal balance outstanding, net of unearned interest, deferred purchase premiums and discounts, deferred loan and lease origination fees and costs, and an allowance for loan and lease losses. Interest income is accrued on the unpaid principal balance. Premiums and discounts on loans purchased as well as loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method.

The Company provides equipment financing to its customers through a variety of lease arrangements. The most common arrangement is a direct financing (capital) lease. For direct financing leases, lease receivables are recorded on the balance sheet but the leased property is not, although the Company generally retains legal title to the leased property until the end of each lease. Direct financing leases are stated at the net amount of minimum lease payments receivable, plus any unguaranteed residual value, less the amount of unearned income and net acquisition discount at the reporting date. Direct lease origination costs are amortized over the life of the lease portfolio. Leases acquired in an acquisition are initially measured and recorded at their fair value on the acquisition date. Purchase discounts or premiums on acquired leases are recognized as an adjustment to interest income over the contractual life of the leases using the effective interest method or taken into income when the related leases are paid off. All equipment financing leases are subject to our allowance for loans and leases.

Recognition of interest income on all portfolio segments is generally discontinued at the time the loan or lease is 90 days delinquent unless the loan and lease is well secured and in process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for loans and leases placed on nonaccrual, is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual status. Loans and leases are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

Seasonal fluctuations in the Other loan classification and its associated allowance for loan and lease losses primarily relate to tax season H&R Block-related loan products. These products are generally short term in nature, in that they are intended to be repaid within a few weeks or months of origination; if they are not repaid timely, they are generally charged off in their entirety at 120 days delinquent, consistent with regulatory guidance for unsecured consumer loan products. The Company provides general loan loss reserves for its H&R Block-related loans based upon prior years’ loss experience with consideration for current year loan performance. While they do incur higher proportional default and charge-off rates than the remainder of the Company’s loan and lease portfolio, these asset quality attributes are within expectations of the design of the products.

~~Loans Held for Sale~~. U.S. government agency (“agency”) loans originated and intended for sale in the secondary market are carried at fair value. Net unrealized gains and losses are recognized through mortgage banking income in the income statement. The Bank sells its mortgage loans with either servicing released or servicing retained depending upon market pricing. Gains and losses on loan sales are recorded as mortgage banking income or other gains on sale, based on the difference between sales proceeds and carrying value. Non-agency loans held for sale are carried at the lower of cost or fair value. The Company has elected the fair value option for Agency loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment.

Loans that were originated with the intent and ability to hold for the foreseeable future (loans held for investment) but which have been subsequently designated as being held for sale for risk management or liquidity needs are carried at the lower of cost or fair value calculated using pools of loans with similar characteristics.

There may be times when loans have been classified as held for sale and cannot be sold. Loans transferred to a long-term investment classification from held-for-sale are transferred at the lower of cost or fair value on the transfer date. Any difference between the carrying amount of the loan and its outstanding principal balance is recognized as an adjustment to yield by the interest method. A loan cannot be classified as a long-term investment unless the Bank has both the ability and the intent to hold the loan for the foreseeable future or until maturity.

~~Allowance for Loan and Lease Losses~~. The allowance for loan and lease losses is maintained at a level estimated to provide for probable incurred losses in the loan and lease portfolio held for investment. Management determines the adequacy of the allowance based on reviews of individual loans and leases and pools of loans, recent loss experience, current economic conditions, the risk characteristics of the various categories of loans and other pertinent factors. This evaluation is inherently subjective and requires estimates that are susceptible to significant revision as more information becomes available. The allowance is increased by the provision for loan and lease losses, which is charged against current period operating results, and recoveries of loans and leases previously charged-off. The allowance is decreased by the amount of charge-offs of loans and leases deemed uncollectible. Allocations of the allowance may be made for specific loans and leases but the entire allowance is available for any loan or lease that, in management’s judgment, should be charged off.

The allowance for loan and lease losses includes general reserves and may include specific reserves. Specific reserves may be provided for impaired loans and leases considered Troubled Debt Restructurings (“TDRs”). All other impaired loans and leases are written down through charge-offs to the fair value of collateral, less estimated selling cost, and no specific or general reserve is provided. A loan or lease is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan or lease agreement. Loans and leases for which terms have been modified resulting in a concession and for which the borrower is experiencing financial difficulties are considered TDRs and classified as impaired. A loan or lease is measured for impairment generally two different ways. If the loan or lease is primarily dependent upon the borrower to make payments, then impairment is calculated by comparing the present value of the expected future payments discounted at the effective loan rate to the carrying value of the loan. If the loan or lease is collateral dependent, the net proceeds from the sale of the collateral is compared to the carrying value of the loan or lease. If the calculated amount is less than the carrying value of the loan or lease, the loan or lease has impairment.

A general reserve is included in the allowance for loan and lease losses and is determined by adding the results of a quantitative and a qualitative analysis to all other loans and leases not measured for impairment at the reporting date. The quantitative analysis determines the Bank’s actual annual historic charge-off rates for the previous three fiscal years and applies the average historic rates to the outstanding loan and lease balances in each pool, the product of which is the general reserve amount. The qualitative analysis considers one or more of the following factors: changes in lending policies and procedures, changes in economic conditions, changes in the content of the portfolio, changes in lending management, changes in the volume of delinquency rates, changes to the scope of the loan and lease review system, changes in the underlying collateral of the loans and leases, changes in credit concentrations and any changes in the requirements to the credit loss calculations. A loss rate is estimated and applied to those loans and leases affected by the qualitative factors. The following portfolio segments have been identified: single family secured mortgage, home equity secured mortgage, single family warehouse and other, multi-family secured mortgage, commercial real estate and land secured mortgage, auto secured and recreational vehicles, factoring, commercial and industrial (“C&I”) and other.

General loan and lease loss reserves are calculated by grouping each mortgage loan or lease by collateral type and by grouping the LTV ratios of each loan within the collateral type. An estimated allowance rate for each LTV group within each type of loan and lease is multiplied by the total principal amount in the group to calculate the required general reserve attributable to that group. Management uses an allowance rate that provides a larger loss allowance for loans with greater LTV ratios. General loan loss reserves for C&I loans are determined through a loan level grading system to base its projected loss rates. A matrix was created with a base loss rate with additional potential industry and volume risk adjustments, to calculate a loss rating for each deal.

Given the lack of historical loss experience for this segment at the Company, an allowance loss range is based upon historical peer loss rates. General loan loss reserves for consumer loans are calculated by grouping each loan by credit score (e.g., FICO) at origination and applying an estimated allowance rate to each group. In addition to credit score grading, general loan loss reserves are increased for all consumer loans determined to be 90 days or more past due. Specific reserves or direct charge-offs are calculated when an internal asset review of a loan or lease identifies a significant adverse change in the financial position of the borrower or the value of the collateral. The specific reserve or direct charge-off is based on discounted cash flows, observable market prices or the estimated value of underlying collateral.

Specific loan or lease charge-offs on impaired loans or leases are recorded as a write-off and a decrease to the allowance in the period the impairment is identified. A loan or lease is classified as a TDR when management determines that an existing borrower is in financial distress and the borrower’s loan or lease terms are modified to provide the borrower a financial concession (e.g., lower payment) that would not otherwise be provided by another lender based upon borrower’s current financial condition. TDRs are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective rate at inception. If a TDR is considered to be a collateral dependent loan or lease, the loan or lease is reported, net, at the fair value of the collateral less cost to sell. For TDRs that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the allowance for loan and lease losses.

If the present value of estimated cash flows under the modified terms of a TDR discounted at the original loan or lease effective rate is less than the book value of the loan or lease before the TDR, the excess is specifically allocated to the loan or lease in the allowance for loan and lease losses.

~~Mortgage Servicing Rights~~.Mortgage servicing assets are recognized when rights are acquired through sale of loans. The Company measures its servicing asset using the fair value method. Under the fair value method, the servicing rights are included in other assets on the consolidated balance sheet at fair value. The changes in fair value are reported in earnings in the period in which the changes occur and the adjustments are included in Non-Interest Income - Mortgage banking income in the consolidated statements of income.

~~Mortgage Banking Derivatives~~. Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in mortgage banking income.

~~Furniture, Equipment and Software~~. Fixed asset purchases in excess of five hundred dollars are capitalized and recorded at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which are three to seven years. Leasehold improvements are amortized over the lesser of the assets’ useful lives or the lease term. Furniture, equipment and software are included in the other assets line on the consolidated balance sheet.

~~Income Taxes~~. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. The Company records a valuation allowance when management believes it is more likely than not that deferred tax assets will not be realized. An income tax position will be recognized as a benefit only if it is more likely than not that it will be sustained upon IRS examination, based upon its technical merits. Once that status is met, the amount recorded will be the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company adopted ASU 2016-09 effective July 1, 2017. As a result of the adoption, the Company recorded $2.0 million and $2.4 million of income tax benefits for the fiscal year ended June 30, 2019 and June 30, 2018, respectively, related to excess tax benefits from stock compensation. Prior to 2018, such excess tax benefits were generally recorded directly in stockholders’ equity. This accounting standard may potentially increase the volatility in the Company’s effective tax rates.

~~Securities Borrowed and Securities Loaned~~. Securities borrowed and securities loaned transactions are reported as collateralized financings and recorded at the amount of cash collateral advanced or received. Securities borrowed transactions require the Company to deposit cash with the lender. With respect to securities loaned, the Company receives collateral in the form of cash in an amount in excess of the fair value of securities loaned. The Company monitors the fair value of securities borrowed and loaned on a daily basis, with additional collateral obtained or refunded, as necessary.

~~Customer, Broker-Dealer and Clearing Receivables and Payables~~. ~~Customer, broker-dealer and clearing receivables include receivables of the Company’s broker-dealer subsidiaries, which represent amounts due on cash and margin transactions~~

and are generally collateralized by securities owned by clients. These receivables, primarily consisting of floating-rate loans collateralized by customer-owned securities, are charged interest at rates similar to other such loans made throughout the industry. The receivables are reported at their outstanding principal balance net of allowance for doubtful accounts. When a receivable is considered to be impaired, the amount of the impairment is generally measured based on the fair value of the securities acting as collateral, which is measured based on current prices from independent sources, such as listed market prices or broker-dealer price quotations. Securities owned by customers, including those that collateralize margin or other similar transactions, are not reflected in the balance sheet. Also included in these accounts are receivables and payables from brokers and dealers and clearing organizations as well as securities failed to deliver and receive.

~~Business Combinations.~~ Mergers and acquisitions are accounted for in accordance with ASC 805 “Business Combinations” using the acquisition method of accounting. Assets and liabilities acquired and assumed are generally recorded at their fair values as of the date of the transaction. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Significant estimates and judgments are involved in the fair valuation and purchase price allocation process.

~~Goodwill and Other Intangible Assets~~. Goodwill represents the excess of the cost of an acquisition over the fair value of the net assets acquired. Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights. Intangible assets that have finite lives, such as core deposit intangibles, are amortized over their estimated useful lives and subject to periodic impairment testing. Intangible assets (other than goodwill) are amortized to expense using accelerated or straight-line methods over their respective estimated useful lives.

Goodwill is subject to impairment testing at the reporting unit level, which is conducted at least annually. The Company performs impairment testing during the third quarter of each year or when events or changes in circumstances indicate the assets might be impaired.

The Company performs a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing updated qualitative factors, the Company determines it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it does not have to perform the two-step goodwill impairment test. Determining the fair value of a reporting unit under the first step of the goodwill impairment test and determining the fair value of individual assets and liabilities of a reporting unit under the second step of the goodwill impairment test are judgmental and often involve the use of significant estimates and assumptions. Similarly, estimates and assumptions are used in determining the fair value of other intangible assets. Estimates of fair value are primarily determined using discounted cash flows, market comparisons and recent transactions. These approaches use significant estimates and assumptions including projected future cash flows, discount rates reflecting the market rate of return, projected growth rates and determination and evaluation of appropriate market comparables. Future events could cause the Company to conclude that goodwill or other intangibles have become impaired, which would result in recording an impairment loss. Any resulting impairment loss could have a material adverse impact on the Company’s financial condition and results of operations.

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

The Company accounts for ~~unvested stock-based compensation awards containing non-forfeitable rights to dividends or dividend equivalents (collectively, “dividends”~~certain revenue streams under Accounting Standards Codification (“ASC”) as participating securities and includes the awards in the EPS calculation using the two-class method. The Company has granted restricted stock units under the 2004 Plan to certain directors and employees, which entitle the recipients to receive non-forfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of common stock. These unvested awards meet the definition of participating securities. Under the two class method, all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities, based on their respective rights to receive dividends. Under the 2014 Plan, restricted stock units have no shareholder rights, meaning they are not entitled to dividends and are considered nonparticipating. These nonparticipating restricted stock units are not included in the basic earnings per common share calculation and are included in the diluted earnings per common share calculation using the treasury stock method.

~~Stock-Based Compensation~~. Compensation cost is recognized for stock options and restricted stock unit awards issued to employees, based on the fair value of these awards at the date of grant. A Black–Scholes model is utilized to estimate fair value of the stock options, while market price of the Company’s common stock at the date of grant is used for restricted stock unit awards, except for the Chief Executive Officer’s restricted stock unit awards under an employment agreement effective July 1, 2017. For

the Chief Executive Officer’s restricted stock unit awards under an employment agreement effective July 1, 2017, a Monte Carlo simulation is utilized to estimate the value of path-dependent options in order to determine the fair value of the restricted stock unit award. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with only a service condition that have a graded vesting schedule, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. For awards that contain a market condition and have a graded vesting schedule compensation cost is recognized using an accelerated attribution method over the requisite service period for the awards.

~~Stock of Regulatory Agencies~~. The Bank is a member of the Federal Home Loan Bank (“FHLB”) system. Members are required to own a certain amount of FHLB stock based on the level of borrowings and other factors. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Axos Securities is a member of the Depository Trust & Clearing Corporation (DTCC), a financial services company providing clearing and settlement services to the financial markets. Members are required to own a certain amount of DTCC stock based on the clearing levels and other factors. DTCC stock is carried at fair value, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.

~~Cash Surrender Value of Life Insurance~~. The Bank has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other amounts due that are probable at settlement. Cash surrender value of life insurance is included in the other assets line on the consolidated balance sheet.

~~Loan Commitments and Related Financial Instruments~~. Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. The allowance for loan commitments is included in Accounts payable and accrued liabilities and other liabilities and adjustments to the allowance run through provision for loan and lease loses.

~~Comprehensive Income~~. Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available-for-sale, which are also recognized as separate components of equity.

~~Loss Contingencies~~. Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. Management does not believe there are now such matters that will have a material effect on the financial statements.

~~Dividend Restriction~~. Banking regulations require maintaining certain capital levels and may limit the dividends paid by the Bank to the holding company. As of June 30, 2019, there are no dividend restrictions on the Bank or the Company.

~~Fair Value of Financial Instruments~~. Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in Note 3. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates.

~~Revenue Recognition~~. ~~On July 1, 2018, the Company adopted ASU 2014-09, “~~Topic 606, Revenue from Contracts with Customers ~~(Topic 606)~~”(“ASC 606”), and all subsequent amendments using a modified retrospective approach. The implementation of the new standard did not have a material impact on the measurement, timing, or recognition of revenue. Accordingly, no cumulative effect adjustment to opening retained earnings was deemed necessary. Results for reporting periods beginning after July 1, 2018 are presented under Topic 606, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

~~The core principle of Topic 606 is~~which provides that an entity ~~should~~shall recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods orand services. ~~The standard affects all entities that either enter into contracts with customers to transfer goods or services or enter into contracts for the transfer of nonfinancial assets unless those contracts~~Certain non-interest income, such as deposit service fees, advisory fee income and broker-dealer clearing fees, are within the scope of ASC 606.

Advisory Fee Income - Asset-Based Custody Fees and Asset-Based Fund Fees. Asset based custody fees consist of custody fees, and other ~~guidance.~~ancillary fees. Custody fees vary based on a percentage of average customer assets under custody. Other ancillary fees may be charged based on average customer assets or based on specific activity. Revenue is recognized over the period where assets are held as the customer simultaneously receives and consumes the benefits. Asset based fund fees consist of 12b-1 and mutual fund shareholder services fees. Asset based fund fees are charged based on a percentage of client assets invested in certain funds. Revenue is calculated each month based on the average daily assets invested in particular funds. Revenue is recognized over the period where assets are invested in certain funds. The performance obligations relates to directing the assets to certain funds and revenue recognition is constrained until the amount of average assets invested in each fund is known.

~~Topic 606 does~~Broker Dealer Clearing Fees. The Company earns revenues for executing, settling and clearing securities transactions for other broker-dealers on a fully disclosed basis. Trade execution and clearing services, when provided together, represent a single performance obligation as the services are not ~~apply to revenue~~separately identifiable in the context of the contract. Revenues associated with ~~financial instruments, including revenue~~ combined trade execution and clearing services, as well as trade execution services on a standalone basis, are recognized at a point in time on trade-date. The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying security or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from ~~loans~~the customer. The Company also earns revenues for services which are separately identifiable and ~~securities. In addition, certain non-interest income streams such~~represent a distinct performance obligation which is recognized over time as ~~gain~~the customer simultaneously receives and

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consumes the benefits. Certain clearing or ~~loss associated with mortgage servicing rights, financial guarantees, derivatives, and income from bank owned life insurance are also not within the scope~~other related fees represent a modification of the ~~new guidance. Topic 606 is applicable to non-interest income such~~original contract as ~~deposit related~~they are distinct services. All trade and execution services are priced at their standalone selling price. Clearing and other fees ~~interchange fees, merchant related income. However,~~are generally deducted from the ~~recognition of these revenue streams did not change significantly upon adoption of Topic 606. Non-interest income considered to be within the scope of Topic 606 is discussed below.~~

introducing brokers’ commissions on a monthly basis.

Deposit Service Fees. Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and public checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied and related revenue recognized, when incurred. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.

~~Fees, Exchange, and Other Service Charges.~~Card Fees. Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM or a non-Company cardholder uses a Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month.

~~Broker dealer clearing fees.~~ The Company earns revenues for executing, settling and clearing securities transactions for other broker-dealers on a fully disclosed basis. Trade execution and clearing services, when provided together, represent a single performance obligation as the services are not separately identifiable in the context of the contract. Revenues associated with combined trade execution and clearing services, as well as trade execution services on a standalone basis, are recognized at a point in time on trade-date. The Company believes that the performance obligation is satisfied on the trade date because that is when the underlying security or purchaser is identified, the pricing is agreed upon and the risks and rewards of ownership have been transferred to/from the customer. The Company also earns revenues for custody services which are separately identifiable and represent a distinct performance obligation which is recognized over time as the customer simultaneously receives and consumes the benefits. Certain clearing or custody related fees represent a modification of the original contract as they are distinct services. All trade and execution services are priced at their standalone selling price. Clearing and other fees are generally deducted from the introducing brokers’ commissions on a monthly basis.

Bankruptcy Trustee and Fiduciary Service Fees. Bankruptcy Trustee and Fiduciary Service income is primarily comprised of fees earned from the Monthly Basis Point Fee and Bank Account Service Charge. The products and services provided to the Trustee also indirectly provide additional deposits to the other banks. One of the uses of the increased deposits by the other banks is to fund the fees paid. The performance obligation is satisfied when the deposits are increased (or decreased) at the end of each month. The expected value method will be used to calculate and record the estimated revenue at the beginning of each month with a subsequent reconciliation to actual at the end of each month.

The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606 for the periods ~~indicated.~~indicated:

June 30,
(Dollars in thousands, except per share data) 2019 2018
Non-interest income
Deposit service fees $ 3,513
$ 3,219
Card fees 5,340
3,623
Broker-dealer clearing fees 11,737
—
Bankruptcy trustee and fiduciary service fees 7,036
1,991
Non-interest income (in-scope of Topic 606) 27,626
8,833
Non-interest income (out-of-scope of Topic 606) 55,131
62,108
Total non-interest income $ 82,757
$ 70,941


	Year Ended June 30,
(Dollars in thousands)	2022		2021		2020
Advisory fee income	$	28,309	$	—	$	—
Broker-dealer clearing fees	19,754		22,156		16,265
Deposit service fees	4,508		4,173		4,240
Card fees	3,764		3,625		5,040
Bankruptcy trustee and fiduciary service fees	3,099		1,380		1,272
Non-interest income (in-scope Topic 606)	59,434		31,334		26,817
Non-interest income (out-of-scope Topic 606)	53,929		73,927		76,170
Total non-interest income	$	113,363	$	105,261	$	102,987

Contract Balances. A contract asset or receivable is recognized if the Company performs a service or transfers a good in advance of receiving consideration. A contract liability is recognized if the Company receives consideration (or has the unconditional right to receive consideration) in advance of performance. As of June 30, ~~2019,~~2022 and 2021, respectively, the Company’s contract assets and liabilities were not considered material.

~~Contract Acquisition Costs.~~ The Company uses the practical expedient to expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in less than one year. In adopting the guidance in Topic 606, the Company did not capitalize any contract acquisition costs.

Other. Income from bank owned life insurance is accounted for in accordance with ASC 325, Investments - Other. Increases in the net cash surrender value of the policies, as well as insurance proceeds received, are recorded in non-interest income and are not subject to income taxes. Lending related income includes fees earned from gains or losses on the sale of loans, SBA income, and letter of credit fees. Gains and losses on the sale of loans and ~~SBA~~Small Business Administration (“SBA”) income are recognized pursuant to ASC 860, Transfers and Servicing. Gain or loss on the sale of financial assets is measured as the net assets received from the sale less the carrying amount of the loan sold. The net assets received from the sale represent the fair value of any assets obtained or liabilities incurred as part of the transaction, including but not limited to cash, servicing assets, retained securitization investments and recourse obligations. Fees related to standby letters of credit are accounted for in accordance with ASC 440, Commitments. Net gain or loss on sales / valuations of repossessed and other assets is presented as a component of non-interest expense but may also be presented as a component of non-interest income in the event that a net gain

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is recognized. Net gain or loss on sales of repossessed and other assets are accounted for in accordance with ASC 610, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets.

~~New Accounting Pronouncements~~Cash and Cash Equivalents.

~~Accounting Standards Adopted During Fiscal 2019~~

~~In November 2016, the FASB issued ASU 2016-18,~~ ~~Restricted Cash (Topic 326):Restricted Cash. This ASU will amend the guidance in ASC Topic 230, Statement~~ The Bank’s cash, due from banks, money market mutual funds and federal funds sold, all of ~~Cash Flows, and is intended to reduce the diversity in the classification and presentation~~which have original maturities within 90 days, consist of ~~changes in restricted cash on the statement of cash flows. The amendments within this ASU will require that the reconciliation of the beginning-of-period and end-of-period~~ cash and cash ~~equivalents amounts shown~~equivalents. Net cash flows are reported for customer deposit transactions.

Cash segregated for regulatory purposes. The Board of Governors of the Federal Reserve System (“the Federal Reserve”) regulations require depository institutions to maintain certain minimum reserve balances. Included within this are cash balances required by the Federal Reserve Bank of San Francisco (“FRBSF”) of the Bank. In addition, this line item includes qualified deposits in special reserve bank accounts for the exclusive benefit of Axos Clearing customers in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other regulations.

Securities. The Company classifies securities at the time of purchase depending on intent. Debt securities are classified as held-to-maturity and carried at amortized cost when management has both the positive intent and ability to hold them to maturity. Debt securities are classified as available-for-sale when they might be sold before maturity. Securities available-for-sale are reported at estimated fair value, with unrealized gains and losses, net of the related tax effects, excluded from operations and reported as a separate component of “Accumulated other comprehensive income or loss” on the ~~statement~~Consolidated Balance Sheets. Trading securities refer to certain types of ~~cash flows include restricted cash~~assets that banks hold for resale at a profit or when the Company elects to account for certain securities at fair value. Increases or decreases in the fair value of trading securities are recognized in earnings as they occur.

Gains and ~~restricted cash equivalents. If restricted cash~~losses on securities sales are based on a comparison of sales proceeds and ~~restricted cash equivalents~~the amortized cost of the security sold using the specific identification method. Purchases and sales are ~~presented separately from cash and cash equivalents~~recognized on the ~~balance sheet,~~trade date. Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are amortized or accreted using the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. For available-for-sale debt securities in an ~~entity~~unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that it will be required to ~~reconcile~~sell the ~~amounts presented on~~security before recovery of its amortized cost basis. If either of the ~~statement~~criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For available-for-sale debt securities that do not meet the aforementioned criteria, the Company evaluates at the individual security level whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the ~~amounts~~amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. The remaining change in fair value is recognized in “Other comprehensive income” on the Consolidated Statements of Comprehensive Income. Changes in the allowance for credit losses, if any, are recorded as a provision for (or reversal of) credit losses. Losses are charged against the allowance when management believes the available-for-sale investment security is confirmed as uncollectible or when either of the criteria regarding intent or requirement to sell is met.

Loans. Loans that are held for investment are loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at the principal balance outstanding, net of unearned interest, deferred purchase premiums and discounts, deferred loan origination fees and costs, and an allowance for credit loss - loans. Interest income is accrued on the unpaid principal balance. Premiums and discounts on loans purchased as well as loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method.

As a result of the change from adopting Accounting Standards Update (“ASU”) 2016-13, “Measurement of Credit Losses on Financial Instruments” and all subsequent amendments that modified ASU 2016-13 (collectively, “ASC 326”) on July 1, 2020, the Company updated categorization of the loan portfolio.

Single Family - Mortgage & Warehouse.The Single Family Real Estate portfolio primarily consists of two loan types: single family mortgage loans and single family warehouse lines of credit. The single family mortgage loans consist of fixed-rate and adjustable-rate loans secured by one-to-four family residences located in the U.S. The Company’s lending policies generally limit the maximum LTV ratio on one-to-four family loans to 80% of the lesser of the appraised value or the purchase price, plus pledged collateral. Terms of maturity typically range from 15 to 30 years. The Company attempts to mitigate residential lending risks by adhering to its underwriting policies in evaluating the collateral and the credit-worthiness of the borrower. The Company also originates home equity lines of credit and second mortgage loans. Single family warehouse lines of credit consist of short-term, secured advances to mortgage bankers on a revolving basis. These facilities enable the mortgage originators to close loans in their own names and temporarily finance inventories of closed mortgage loans until they can be sold to an

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approved investor. Mortgage loans aged on a mortgage banking customer’s line longer than 60 days are investigated by the Bank, which can require the borrower to pay down the line. The Company attempts to mitigate residential lending risks by adhering to its underwriting policies in evaluating the collateral and the credit-worthiness of the borrower.

Multifamily and Commercial Mortgage.The Company originates loans secured by multifamily real estate (more than four units) and commercial real estate (typically from $0.5 million to $10 million). These loans involve a greater degree of risk than one-to-four family residential mortgage loans as these loans can be greater in amount, dependent on the cash flow capacity of the project, and may be more difficult to evaluate and monitor. Repayment of loans secured by properties frequently depends on the successful operation and management of the properties. Consequently, repayment of such loans may be affected by adverse conditions in the real estate market or economy. The Company attempts to mitigate these risks by monitoring the LTV and minimum debt service coverage ratios, in addition to thoroughly evaluating the global financial condition of the borrower, the management experience of the borrower, and the quality of the collateral property securing the loan.

Commercial Real Estate.The Company originates loans across the U.S. secured by commercial real estate properties (“CRE”) under a variety of structures that it classifies as commercial real estate. A few examples are as follows: Commercial Bridge to Sale, Commercial Bridge to Construction, Commercial Bridge to Refinance and Acquisition, Development, and Construction. CRE Loans are originated to businesses secured by first liens on single family, multifamily, condominium, office, retail, mixed-use, hospitality, undeveloped or to-be-redeveloped land or small business loans. Repayment of CRE loans depends on the successful completion of the real estate transition project and permanent take-out. The Company attempts to mitigate risk by adhering to its underwriting policies in evaluating the collateral and the credit-worthiness of borrowers and guarantors.

Commercial & Industrial - Non-Real Estate (Non-RE).Comprising the majority of this portfolio are commercial and industrial non-real estate, asset-backed loans, lines of credit and term loans made to commercial borrowers secured by commercial assets, including, but not limited to, receivables, inventory and equipment. The Company typically reduces it exposure in these loans by entering into a structured facility, under which the Company takes a senior lien position collateralized by the underlying assets at advance rates well inside the collateral value. Commercial and industrial leases comprise the remainder of this portfolio and are primarily made based on the operating cash flows of the borrower or conversion of working capital assets to cash and secondarily on the underlying collateral provided by the borrower. The Company assesses whether each lease arrangement qualifies as a sale under ASC 606. The Company has determined that the equipment financing lease arrangements do not qualify as a sale as the buyer lessors do not obtain control of the assets in the Company’s ongoing sale leaseback arrangements. Therefore, the leased equipment is not capitalized on the balance sheet. ~~An entity will also~~Although commercial and industrial loans and leases are often collateralized directly or indirectly by equipment, inventory, accounts or loans receivable or other business assets, the liquidation of collateral in the event of a borrower default may be an insufficient source of repayment because accounts or loans receivable may be uncollectible and inventories and equipment may be obsolete or of limited use. The Company attempts to mitigate these risks through the structuring of these lending products, adhering to its underwriting policies in evaluating the management of the business and the credit-worthiness of borrowers and guarantors.

Auto and Consumer.This segmentconsists of the following distinct classes:

Auto.The Company originates prime loans to customers secured by new and used vehicles. The Company holds all of the auto loans originated and performs loan servicing functions for these loans. Auto loans carry a fixed interest rate and have terms that range from two to eight years. The Company attempts to mitigate auto lending risks by adhering to its underwriting policies in evaluating the collateral and the credit-worthiness of the borrower.

Consumer Unsecured Lending. The Company originates fixed rate unsecured loans to individual borrowers in all fifty states. Loans are normally in the range between $5,000 and $50,000 with terms that range between twelve and seventy-two months to well-qualified borrowers. The minimum credit score is 700. All applicants apply digitally and are required to ~~disclose information regarding~~supply proof of income, identity, and bank account documentation. The Company attempts to mitigate risks by using seasoned underwriters to review each loan, leveraging customer interviews and data analytics in the ~~nature~~underwriting process.

Other.The Company originates other loans, which include structured settlements, SBA consumer loans and refund advance loans. Structured settlements are originated through the wholesale and retail purchase of state lottery prize and structured settlement annuities. These annuities are high credit quality deferred payment receivables having a state lottery commission or primarily highly rated insurance company payor. Purchases of state lottery prize or structured settlement annuities are governed by specific state statutes requiring judicial approval of each transaction. No transaction is funded before an order approving such transaction has been entered by a court of competent jurisdiction. The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the credit-worthiness of the ~~restrictions. ASU 2016-18 requires retrospective application~~state or insurer. Federal Paycheck Protection Program (“PPP”) loans made by the Bank under the Federal Coronavirus Aid, Relief and Economic Security Act (“CARES”) Act are guaranteed by the SBA and, if the loan funds are used by the borrower for specific purposes as provided under the PPP, may be fully or partially forgiven by the SBA at which time, the Bank will receive funds related to the PPP loan

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forgiveness directly from the SBA. Because of the underwriting policies and SBA guarantee, the Company does not expect any probable incurred credit losses and has provided a de minimis amount of allowance for credit losses.

Recognition of interest income on all portfolio segments is ~~effective~~generally discontinued at the time the loan is 90 days delinquent unless the loan is well secured and in process of collection. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged-off at an earlier date if collection of principal or interest is considered doubtful. All interest accrued but not received for ~~fiscal years beginning after December 15, 2018~~loans placed on nonaccrual, is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost recovery method, until qualifying for return to accrual status. Loans are returned to accrual status when all the principal and ~~interim periods within those fiscal years,~~interest amounts contractually due are brought current and future payments are reasonably assured.

Loans Held for Sale. Loans held for sale includes agency loans and non-agency loans held for sale. Agency loans originated and intended for sale in the secondary market are carried at fair value. Net unrealized gains and losses are recognized through mortgage banking income in the income statement. The Bank sells its mortgage loans with ~~early adoption permitted.~~either servicing released or servicing retained depending upon market pricing. Gains and losses on loan sales are recorded as mortgage banking income, based on the difference between sales proceeds and carrying value. Non-agency loans held for sale are carried at the lower of cost or fair value. The Company ~~adopted~~has elected the fair value option for Agency loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment.

Loans that were originated with the intent and ability to hold for the foreseeable future (loans held for investment), but which have been subsequently designated as being held for sale for risk management or liquidity needs are carried at the lower of cost or fair value calculated using pools of loans with similar characteristics.

Allowance for Credit Losses. The allowance for credit losses (“ACL”) is a valuation account that offsets the amortized cost basis of loans and net investment in leases. Under ASC 326, amortized cost is the basis on which the ACL is determined. Amortized cost is principal outstanding, net of any purchase premiums and discounts and net of any deferred loan fees and costs.

Credit losses are charged off when the Company believes that collectability of at least some portion of outstanding principal is unlikely. These charge-offs are recorded as a reversal, thereby reducing, the allowance for credit losses. Recoveries on loans previously charged off are recorded as an increase to the allowance for credit losses. The allowance for credit losses is maintained at a level needed to absorb expected credit losses over the contractual life, considering the effects of prepayments, of the loan portfolio as of the reporting date. Determining the adequacy of the allowance for credit losses is complex and requires judgment by Management about the effect of matters that are inherently uncertain. As such, a future assessment of current conditions may require material adjustments to the allowance.

The Company’s process for determining expected life-time credit losses entails a portfolio, model-based approach utilizing loan level detail and requires consideration of a broad range of relevant information relating to historical loss experience, current economic conditions and reasonable and supportable forecasts.

A credit loss is estimated for all loans. Consequently, the Company stratifies the full loan population into segments sharing similar characteristics to perform the evaluation of the credit loss collectively.

The Company defines a segment as the level at which the Company develops a systematic methodology to determine the allowance. Additionally, the Company can further stratify loans of similar type, risk attributes and methods for monitoring credit risk. The Company categorizes the loan portfolio into six segments: Single Family - Mortgage & Warehouse, Multifamily and Commercial Mortgage, Commercial Real Estate, Commercial & Industrial - Non Real Estate, Auto & Consumer and Other. Refer to detail above within this ~~standard on March 31, 2019.~~ Note under Loans.

The ~~new guidance did not have~~method for estimating expected life-time credit losses includes, among other things, the following main components: 1) The use of a ~~significant impact~~probability of default (“PD”)/loss given default (“LGD”) model; 2) defining a number of economic scenarios across the benign to adverse spectrum; 3) a reasonable forecast period of 24 months for all loan segments; and 4) a reversion period of 12 months using a linear transition to historical loss rates for each loan pool. After the reversion period, the historical loss rate is applied over the remaining contractual life of loan. Reasonable forecast periods and reversion periods are

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subject to periodic review and may be adjusted based on the Company’s ~~consolidated financial statements~~view of current economic conditions. The results of the estimate are calculated for several scenarios across the benign to adverse spectrum for each of the Company’s loan portfolio segments. The weighting of scenarios is subject to periodic review and may be adjusted based on the Company’s view of current economic conditions.

Given the inherent limitations of a solely quantitative model, qualitative adjustments are included to arrive at the ~~time~~ending calculated loss amount in order to account for data points not captured from quantitative inputs alone.

Qualitative criteria we consider includes, among other things, the following:

•Regulatory and Legal - matters that may impact the timeliness and/or amounts of ~~adoption.~~repayments;

~~In January 2017,~~•Concentration - portfolio composition and loan concentration;

•Collateral Dependency - changes in collateral values;

•Lending/Underwriting Standards - current lending policies and the ~~FASB issued ASU 2017-01,~~ effects of any new policies;

•~~Business Combinations (Topic 805): Clarifying~~Nature and Volume - loan production volume and mix;

•Macroeconomic Environment - considerations not reflected in the ~~Definition~~data utilized in the model; and

•Loan Trends - credit performance trends, including a borrower’s financial condition and credit rating.

Specifically, Management reviews whether the model reflects the appropriate level of PD and LGD, given the macroeconomic forecasts used as compared to the Company’s loan portfolio. Management determines the adequacy of the allowance for credit losses based on reviews of individual loans, recent loss experience, current economic conditions, expectations about future economic conditions, the risk characteristics of the various categories of loans and other pertinent factors. If, based on Management’s evaluation, macroeconomic factors do not capture Management’s assumption regarding collateral values (LGD) and defaults (PD), Management will apply additional qualitative overlays to the loan portfolio. This evaluation is inherently subjective and requires estimates that are susceptible to significant revision as more information becomes available.

Prior to July 1, 2020, the entire allowance for credit losses for each portfolio class was a ~~Business~~valuation allowance for probable losses existing in the loan portfolio. Under the prior methodology, the quantitative analysis determined was based on the Bank’s actual annual historic charge-off rates for the previous three fiscal years and applies the average historic rates to the outstanding loan and lease balances in each pool, the product of which is the general reserve amount. The qualitative analysis considered one or more of the following factors: changes in lending policies and procedures, changes in economic conditions, changes in the content of the portfolio, changes in lending management, changes in the volume of delinquency rates, changes to the scope of the loan and lease review system, changes in the underlying collateral of the loans and leases, changes in credit concentrations and any changes in the requirements to the credit loss calculations. When specific loan impairment analysis is performed under ASC 310-10, the impairment was either recorded as a charge-off to the loan allowance or, if such loan was a troubled debt restructuring (“TDR”), the impairment is recorded as a specific loan loss allowance.

Accrued Interest. Accrued interest receivable is excluded from amortized cost and is presented separately in “Other Assets” on the Consolidated Balance Sheets. Additionally, the Company does not estimate an allowance for credit losses on accrued interest receivable as the Company has a policy to charge off accrued interest deemed uncollectible in a timely manner. When a loan is placed on non-accrual status, which occurs when a borrower becomes delinquent by 90 days, interest previously accrued but not collected is reversed against current period interest income.

Individually Assessed Loans.Credit loss is estimated for any individual loan on a collective basis, unless an individual loan’s credit characteristics has deteriorated below a range of the overall group, in which case the loan would then be individually assessed. Individually assessed loans are measured for credit loss based on present value of future expected cash flows, discounted at the loan’s effective interest rate or the fair value of the collateral, less estimated selling costs, if the loan is collateral-dependent.

Loan Commitments.Loans commitments not unconditionally cancellable are subject to an estimate of credit loss under a current expected credit loss model. The Company’s process for determining the estimate of credit loss on loan commitments is the same as it is on loans. Refer to detail of Allowance on Credit Losses above. Allowance on Credit Losses of off-balance sheet commitments is presented separately in “Accounts payable, accrued liabilities and other liabilities” on the Consolidated Balance Sheets.

Leases. The Company leases office space under operating lease agreements scheduled to expire at various dates. The Company accounts for leases under ASC 842, Leases. At lease commencement, lease liabilities are recognized based on the present value of the remaining lease payments and discounted using the Company’s incremental borrowing rate, which is a blended rate comprised of the FHLB term rate and the Company’s subordinated debt rate. Right-of-use assets initially equal the lease liability, adjusted for any lease payments made prior to lease commencement and for any lease incentives.

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Lessor Arrangements. The Company provides equipment financing to its customers through a variety of lessor arrangements. Direct financing leases and sales-type leases are carried at the aggregate of lease payments receivable plus the estimated residual value of the leased property less unearned income, which is accreted to interest income over the lease terms using methods that approximate the interest method. Operating lease income is recognized on a straight-line basis. Leases generally do not contain non-lease components.

Lessee Arrangements. Substantially all of the Company’s lessee arrangements are operating leases. Under these arrangements, the Company records right-of-use assets and lease liabilities at lease commencement. Right-of-use assets are reported in “Other assets” on the Consolidated Balance Sheets, and the related lease liabilities are reported in “Accounts payable, accrued liabilities and other liabilities”. All leases are recorded on the Consolidated Balance Sheets, except leases with an initial term less than 12 months for which the Company made the short-term lease election. Lease expense is recognized on a straight-line basis over the lease term and is recorded in “Occupancy and equipment” expense in the Consolidated Statements of Income.

Mortgage Servicing Rights.Mortgage servicing assets are recognized when rights are retained upon sale of loans. The Company measures its servicing asset using the fair value method. Under the fair value method, the servicing rights are included on the Consolidated Balance Sheets at fair value. The changes in fair value are reported in earnings in the period in which the changes occur and the adjustments are included in “Mortgage banking income”, a component of non-interest income in the Consolidated Statements of Income.

Mortgage Banking Derivatives. Commitments to fund mortgage loans (interest rate locks) to be sold into the secondary market and forward commitments for the future delivery of these mortgage loans are accounted for as free standing derivatives. Fair values of these mortgage derivatives are estimated based on changes in mortgage interest rates from the date the interest on the loan is locked. The Company enters into forward commitments for the future delivery of mortgage loans when interest rate locks are entered into, in order to economically hedge the change in interest rates resulting from its commitments to fund the loans. Changes in the fair values of these derivatives are included in “Mortgage banking income” on the Consolidated Statements of Income.

Furniture, Equipment and Software. Fixed assets are stated at cost less accumulated depreciation and amortization computed primarily using the straight-line method over the estimated useful lives of the assets, which are three to seven years and recorded within “Depreciation and amortization”, which ~~changes~~is a component of non-interest expense on the ~~definition~~Consolidated Statements of ~~a business to assist entities with evaluating when a set~~Income. Leasehold improvements are amortized over the lesser of ~~transferred~~the assets’ useful lives or the lease term. Furniture, equipment and software are included in “Other assets” on the Consolidated Balance Sheets.

Income Taxes. Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and ~~activities~~liabilities. Deferred income tax assets and liabilities are determined using the asset and liability method. Under this method, the net deferred tax asset or liability is ~~deemed~~determined based on the tax effects of the temporary differences between the book and tax bases of the various assets and liabilities on the Consolidated Balance Sheets and gives current recognition to changes in tax rates and laws. The Company records a valuation allowance when management believes it is more likely than not that deferred tax assets will not be realized. An income tax position will be recognized as a ~~business. Determining whether a transferred set constitutes a business~~benefit only if it is ~~important because~~more likely than not that it will be sustained upon examination by the ~~accounting for a business combination differs from~~Internal Revenue Service, based upon its technical merits. Once that status is met, the amount recorded will be the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

Securities Borrowed and Securities Loaned. Securities borrowed and securities loaned transactions are reported as collateralized financings and recorded at the amount of cash collateral advanced or received. Securities borrowed transactions require the Company to deposit cash with the lender. With respect to securities loaned, the Company receives collateral in the form of cash in an ~~asset acquisition. The definition of a business also affects the accounting for dispositions. Under the new standard, when substantially all~~amount in excess of the fair value of assets acquired is concentrated in a single asset, or a group of similar assets, the assets acquired would not represent a business and business combination accounting would not be required. The new standard may result in more transactions being accounted for as asset acquisitions rather than business combinations.securities loaned. The Company ~~adopted this standard on July 1, 2018. The new guidance did not have a significant impact on~~monitors the ~~Company’s consolidated financial statements at the time of adoption.~~

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment:~~ The objective of this guidance is to simplify an entity’s required test for impairment of goodwill by eliminating Step 2 from the goodwill impairment test. In Step 2 an entity measured a goodwill impairment loss by comparing the implied fair value of securities borrowed and loaned on a ~~reporting unit’s goodwill~~daily basis, with additional collateral obtained or refunded, as necessary.

Customer, Broker-Dealer and Clearing Receivables and Payables. Customer, broker-dealer and clearing receivables include receivables of the ~~carrying amount~~Company’s broker-dealer subsidiaries, which represent amounts due on cash and margin transactions and are generally collateralized by securities owned by clients. These receivables primarily consist of floating-rate loans collateralized by customer-owned securities. The receivables are reported at their outstanding principal balance net of allowance for doubtful accounts. When a receivable is considered to be impaired, and impairment charge is recorded based on the current estimate of credit loss for the receivable, which is measured based on current prices from independent sources, such as listed market prices or broker-dealer price quotations. Securities owned by customers, including those that ~~goodwill. In computing~~collateralize margin or other similar transactions, are not reflected on the ~~implied~~Consolidated Balance Sheets. Also included in these accounts are receivables and payables from brokers and dealers and clearing organizations as well as securities failed to deliver and receive.

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Business Combinations. Mergers and acquisitions are accounted for using the acquisition method of accounting. Assets and liabilities acquired and assumed are recorded at their fair ~~value~~values as of ~~goodwill, an entity had to determine~~ the ~~fair value at the impairment~~ date of ~~its assets and liabilities, including any unrecognized assets and liabilities, following a procedure that would be required in determining~~the transaction. The excess of purchase price over the fair value of assets acquired and liabilities assumed is recorded as goodwill. Significant estimates and judgments are involved in ~~a business combination. Under this Update,~~the fair valuation and purchase price allocation process.

Goodwill and Other Intangible Assets. Goodwill represents the excess of the cost of an ~~entity should perform its annual or quarterly goodwill impairment test by comparing~~acquisition over the fair value of the net assets acquired. Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights. Intangible assets that have finite lives, such as core deposit intangibles, are amortized over their estimated useful lives and subject to periodic impairment testing. Intangible assets (other than goodwill) are amortized to “Depreciation and amortization”, a component of non-interest expense on the Consolidated Statements of Income, using accelerated or straight-line methods over their respective estimated useful lives.

Goodwill is subject to impairment testing at the reporting unit ~~with~~level, which is conducted at least annually. The Company performs impairment testing during the third quarter of each year or when events or changes in circumstances indicate the assets might be impaired.

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

The Company accounts for unvested stock-based compensation awards containing non-forfeitable rights to dividends or dividend equivalents (collectively, “dividends”) as participating securities and includes the awards in the EPS calculation using the two-class method. Under the two class method, all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities, based on their respective rights to receive dividends. Under the Amended and Restated 2014 Stock Incentive Plan (the “2014 Plan”), restricted stock units have no shareholder rights, meaning they are not entitled to dividends and are considered nonparticipating. These nonparticipating restricted stock units are not included in the basic earnings per common share calculation and are included in the diluted earnings per common share calculation using the treasury stock method.

Stock-Based Compensation. Compensation cost is recognized for restricted stock unit awards issued to employees, based on the fair value of these awards at the date of grant. Market price of the Company’s common stock at the date of grant is used for restricted stock unit awards. The Company has certain share awards that include market conditions that affect vesting. The fair value of these awards is estimated using a Monte Carlo simulation. Compensation cost is recognized over the required service period, generally defined as the vesting period. For awards with only a service condition that have a graded vesting schedule, compensation cost is recognized on a straight-line basis over the requisite service period for the entire award. For awards that contain a market condition and have a graded vesting schedule compensation cost is recognized using an accelerated attribution method over the requisite service period for the awards. The Company accounts for forfeitures by recognizing forfeitures when they occur.

Stock of Regulatory Agencies. The Bank is a member of the Federal Home Loan Bank (“FHLB”) system. Members are required to own a certain amount of FHLB stock based on the level of borrowings and other factors. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Axos Securities, LLC is a member of the Depository Trust & Clearing Corporation (“DTCC”), a financial services company providing clearing and settlement services to the financial markets. Members are required to own a certain amount of DTCC stock based on the clearing levels and other factors. DTCC stock is carried at fair value, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value.

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Low Income Housing Tax Credits (“LIHTC”).The Company invests as a limited partner in LIHTC partnerships that operate qualified affordable housing projects which generate tax benefits for investors through the realization of tax credits and deductions, which may be subject to recapture by taxing authorities if compliance requirements are not met. We amortize the investment in proportion to the allocated tax benefits using the proportional amortization method of accounting and record ~~an impairment charge~~such benefits net of investment amortization in income taxes on the consolidated statements of income. The investment is included within “Other assets” on the Consolidated Balance Sheets.

Cash Surrender Value of Life Insurance. The Bank has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other amounts due that are probable at settlement. Cash surrender value of life insurance is included in the ~~excess~~other assets line on the consolidated balance sheet. Changes to the cash surrender value are recorded within “Banking and service fees”, which is a component of non-interest income on the Consolidated Statements of Income.

Comprehensive Income. Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available-for-sale, which are also recognized as separate components of equity. The method for determining the cost basis of securities sold or reclassed out of other comprehensive income into earnings is based on the value of the ~~carrying amount over the reporting unit’s fair value. The~~specific security and any previously recognized gain or loss recognized should not exceed the total amount of goodwill allocated to the reporting unit and the entity must consider the income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This guidance is effective for a public business entityassociated with that is an SEC filer for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. The new guidance did not have a significant impact on the Company’s consolidated financial statements at the time of adoption.specific security.

New Accounting Standards

Accounting Standards Issued But Not Yet Adopted

In ~~February 2016,~~March 2020, the FASB issued ASU ~~2016-02,~~ ~~Leases, as amended~~No. 2020-04, Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting, and the subsequent January 2021 clarification ASU 2021-04, Reference Rate Reform (Topic 848)—Scope, provide guidance to alleviate the burden in ~~July 2018~~accounting for reference rate reform by ~~ASU 2018-10~~ ~~Codification Improvements~~allowing certain expedients and exceptions in applying generally accepted accounting principles to ~~Topic 842, Leases~~ contracts, hedging relationships, and ~~ASU 2018-11~~ ~~Leases (Topic 842): Targeted Improvements.~~ other transactions impacted by reference rate reform. The ~~new standard establishes a right-of-use model~~provisions apply only to those transactions that ~~requires a lessee~~reference LIBOR or another reference rate expected to ~~record a right~~be discontinued due to reference rate reform. Adoption of ~~use asset~~the provisions are optional and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASUs 2016-02, 2018-10 and 2018-11 are effective ~~for fiscal years beginning after~~from March 12, 2020 through December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is anticipated for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented

~~in the financial statements, with certain practical expedients available.~~31, 2022. The Company ~~has completed its review of contracts and does not expect a material~~is evaluating the impact on the Company’s ~~consolidated financial statements and regulatory capital and risk-weighted assets or results from operations.~~Consolidated Financial Statements, but it does not expect the adoption to have a material impact.

In ~~June 2016,~~March 2022, the FASB issued ASU ~~2016-13~~ 2022-02, Financial ~~Instruments—Credit~~Instruments-Credit Losses (Topic 326)~~: Measurement~~, Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 addresses areas identified by the FASB as part of ~~Credit Losses on Financial Instruments~~ ~~(“ASU 2016-13”), which (i) significantly changes~~its post-implementation review of the ~~impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model; and (ii) provides for recording~~ credit losses ~~on available-for-sale~~standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt ~~securities through an allowance account. ASU 2016-13 also requires certain incremental disclosures. ASU 2016-13 should be applied on a modified-retrospective transition approach~~restructurings by creditors that ~~would~~have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a ~~cumulative-effect adjustment~~public business entity to ~~the opening retained earnings~~disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the statement of financial condition as of the date of adoption. A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date.vintage disclosures. The ~~guidance will be~~amendment would become effective for the ~~Company’s financial statements that include periods beginning~~Company on July 1, ~~2020.~~2023. Early adoption is permitted. The Company ~~has completed~~is evaluating the ~~development~~impact of ASU 2022-02 on the ~~of implementation plan and is in~~Company’s Consolidated Financial Statements, but it does not expect the ~~process of model development. The Company expects ASU 2016-13~~adoption to have a material ~~impact on the Company’s consolidated financial statements.~~

~~In March 2017, the FASB issued guidance within ASU 2017-08,~~ ~~Premium Amortization on Purchased Callable Debt Securities~~. The amendments in ASU 2017-08 to Subtopic 310-20, Receivables-Nonrefundable Fees and Other Costs, shorten the amortization period for certain purchased callable debt securities held at a premium to the earliest call date, which more closely align the amortization period of premiums and discounts to expectations incorporated in market pricing on the underlying securities. Under current GAAP, entities generally amortize the premium as an adjustment of yield over the contractual life of the instrument. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments in this ASU should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The adoption of this guidance is not expected to have a significant impact on the Company’s consolidated financial statements.

~~In August 2017, the~~ ~~FASB~~ ~~issued~~ ~~ASU~~ ~~2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.~~ The ASU expands and refines hedge accounting for both financial and non-financial risk components, aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The effective date of the new standard for public companies is for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The new standard must be adopted using a modified retrospective transition with a cumulative effect adjustment recorded to opening retained earnings as of the initial adoption date. The Company does not anticipate that this guidance will have a material impact on its consolidated financial statements.

~~In June 2018, the FASB issued guidance within ASU 2018-07,~~ ~~Improvements to Nonemployee Share-Based Payment Accounting~~. The amendments in ASU 2018-07 to Topic 718, Compensation-Stock Compensation, are intended to align the accounting for share-based payment awards issued to employees and nonemployees. Changes to the accounting for nonemployee awards include: 1) equity classified share-based payment awards issued to nonemployees will now be measured on the grant date, instead of the previous requirement to remeasure the awards through the performance completion date; 2) for performance conditions, compensation cost associated with the award will be recognized when achievement of the performance condition is probable, rather than upon achievement of the performance condition; and 3) the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. The new guidance also clarifies that any share-based payment awards issued to customers should be evaluated under ASC 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company’s share-based payment awards to nonemployees consist only of grants made to the Company’s nonemployee Directors as compensation solely related to each individual’s role as a nonemployee Director. As such, in accordance with ASC 718, the Company accounts for these share-based payment awards to its nonemployee Directors in the same manner as share-based payment awards for its employees. Accordingly, the amendments in this guidance will not have an effect on the accounting for the Company’s share-based payment awards to its nonemployee Directors.

~~In August 2018, the FASB issued guidance within ASU 2018-13,~~ ~~Fair Value Measurement Disclosure Framework~~ ~~(Topic 820) -~~ ~~Changes to the Disclosure Requirements for Fair Value Measurement.~~ The amendments in ASU 2018-13 require a nonpublic entity to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities. Public companies are also now required to disclose the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Under current GAAP, entities are required to disclose a roll forward for Level 3 fair value measurements. The amendments in this ASU related to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative

description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this ASU. The Company does not anticipate that this guidance will have a material impact on its consolidated financial statements.impact. The Company will ~~adopt this standard on July 1, 2019.~~be required to update certain disclosures around financing receivables and net investment in leases.

2. ACQUISITIONS

On August 2, 2021, the Company’s subsidiary, Axos Clearing, LLC, acquired certain assets and liabilities of E*TRADE Advisor Services (“EAS”), the registered investment advisor custody business of Morgan Stanley. This business was rebranded as Axos Advisor Services (“AAS”). AAS adds incremental fee income, a turnkey technology platform used by independent registered investment advisors for trading and custody services, and low cost deposits that can be used to generate fee income from other bank partners or to fund loan growth at Axos Bank. The ~~Company completed two business acquisitions~~purchase price of $54.8 million consisted entirely of cash consideration paid upon acquisition and ~~two asset acquisitions during~~working capital adjustments. Non-interest income of $30.2 million was recognized in the ~~fiscal~~ year ended June 30, ~~2019 and one business acquisition during~~2022 in the ~~fiscal~~Consolidated Statements of Income for operating results from the date of acquisition.

The Company incurred acquisition-related costs totaling $0.04 million for the year ended June 30, ~~2018.~~ 2022. These costs are recognized in general and administrative expenses in the Consolidated Statements of Income.

The ~~pro forma results of operations and the results of operations for the acquisitions since the~~ acquisition date have not been separately disclosed because the effects were not material to the consolidated financial statements. The Company has included the financial results of the acquired businesses in its consolidated financial statements subsequent to the acquisition dates. The business acquisitions have beenis accounted for as a business combination under the acquisition method of accounting. ~~The assets, both~~Accordingly, tangible and intangible ~~were~~assets acquired (and liabilities assumed) are recorded at their estimated fair values as of the transaction date. The Company made significant estimates and exercised judgment in estimating fair values and accounting for such acquired assets and liabilities. The purchase transactions are detailed below.

~~MWABank deposit acquisition. On March 15, 2019, the Bank closed the deposit assumption agreement with MWA Bank and acquired approximately $173 million~~date of deposits, including approximately $151 million of checking, savings and money market accounts and $22 million of time deposits, from MWABank. Axos did not acquire any assets, employees or branches in this transaction. The Bank received cash equal to the book value of the deposit liabilities.

~~COR Securities Holdings.~~ On January 28, 2019 (“Acquisition Date”), Axos Clearing, LLC and Axos Clarity MergeCo., Inc. completed the acquisition of COR Securities Holdings Inc.(“COR Securities”), the parent company of COR Clearing LLC (“COR Clearing”), pursuant to the terms of the Agreement and Plan of Merger, dated as of September 28, 2018 (the “Merger Agreement”).

The acquisition of COR Securities is being accounted for as a business combination using the acquisition method of accounting and, accordingly, assets acquired, liabilities assumed, and consideration paid are recorded at estimated fair values on the Acquisition Date. The Company recorded goodwill for a provisional amount of $34.9 million and an additional $20.1 million in intangible assets as of the Acquisition Date.acquisition. The estimated fair values of the acquired assets and assumed liabilities are subject to refinement as additional information relative to closing date fair values becomes available. Any subsequent measurement period adjustments to the fair

F-18

values of acquired assets and liabilities assumed, identifiable intangible assets, or other purchase accounting adjustments will result in adjustments to goodwill no later than within the first 12 months following the closing date of acquisition. ~~Included in the professional services line~~

The preliminary allocation of the ~~statement of income the Company recognized $0.4~~$54.6 million ~~in transaction costs.~~

The acquisition will enable the Company to expand its banking business to a new customer base through independent broker-dealers and consumer account relationships, scale entry into wealth management through technology-driven platforms, and increase and diversify fee revenue, all of which will improve key operating metrics. The goodwill recognized results from the expected synergies and potential earnings from this combination.

~~The consideration paid for COR Securities common equity was $88.4 and the provisional fair values of acquired identifiable assets and liabilities assumed as of the Acquisition Date were as follows:~~

(Dollars in thousands) January 28, 2019
ASSETS
Cash and due from banks $ 16,604
Cash segregated for regulatory purposes 142,016
Securities, available for sale 9,585
Stock of the regulatory agencies, at cost 2,431
Securities borrowed 157,898
Customer, broker-dealer and clearing receivables 234,352
Other assets 5,487
Total identifiable assets $ 568,373

LIABILITIES
Borrowings, subordinated notes and debentures $ 85,100
Securities loaned 203,041
Customer, broker-dealer and clearing payables 240,110
Accounts payable and accrued liabilities 7,383
Total identifiable liabilities $ 535,634

Provisional resulting goodwill $ 35,501
Intangible assets 20,120
Total cash paid $ 80,860
Borrowings, subordinated notes and debentures issued $ 7,500
Total fair value of consideration paid $ 88,360

~~Under the terms of the purchase agreement, the aggregate~~ purchase price ~~included the payment~~consisted of ~~$70.0~~$14.4 million ~~in cash. The Company acquired assets with approximate fair values~~ of $32.7 million of intangible assets, including customer relationships, developed technologies, a covenant not to compete and the trade name, and $1.6 million of accounts receivable and fixed assets, resulting in $35.7 million of goodwill. Transaction-related expenses were de minimis.

~~The following table sets forth the approximate~~ fair value of tangible assets acquired, ~~from Epiq on the consolidated balance sheets as~~which included $7.8 million of ~~April 4, 2018:~~

(Dollars in thousands) April 4, 2018
Fair value of consideration paid
Cash $ 70,002
Total consideration paid $ 70,002

Fair value of assets acquired
Intangible assets $ 32,720
Other assets 1,563
Total assets $ 34,283
Fair value of net assets acquired $ 34,283
Goodwill incident to acquisition $ 35,719

~~The Company recognized goodwill~~a right-of-use lease asset, $11.3 million of ~~$35.7~~liabilities assumed, which included $7.8 million as of ~~April 4, 2018, which is calculated as the excess of the consideration exchanged as compared to the fair value~~a lease liabilty, $27.1 million of identifiable intangible assets ~~acquired. Goodwill resulted from expanded product lines~~ and ~~low-cost funding opportunities and~~$24.4 million of goodwill, all of which is expected to be deductible for tax purposes. ~~During~~In December 2021, the ~~fiscal year~~Company made a $0.2 million true-up payment based on working capital adjustments, which was recorded as an increase in the purchase price up to $54.8 million with no impact on goodwill or identifiable intangible assets. After the working capital true-up, the fair value of tangible assets acquired is $14.2 million and the fair value of liabilities acquired is $10.9 million. Identifiable intangible assets with a finite useful are amortized on a straight-line basis. Goodwill was calculated as the excess of consideration exchanged over the fair value of identifiable net assets acquired. The goodwill includes synergies expected to result from combining the acquired assets and liabilities with existing operations, coupling its custody platform with the Company existing product offerings and leveraging customer relationships through RIAs. The following table summarizes the fair value and useful life of each intangible asset acquired as of the acquisition date:


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

The following table presents the results of operations of AAS for the years ended June 30, ~~2019,~~2022 and 2021 on an unaudited pro forma basis, as if the ~~Company settled~~acquisition of the ~~working capital with Epiq. See Note 9~~entity that was rebranded to AAS had been consummated on July 1, 2020 through the ~~consolidated~~periods shown below. The unaudited pro forma financial ~~statements~~information is provided for ~~further~~informational purposes only and is not necessarily indicative of what the Company’s results of operations would have been if the acquisition of EAS had occurred as of July 1, 2020, or the results of operations for any future periods. Additionally, the information presented as follows does not reflect any synergies or other strategic benefits as a result of acquisition.


	Pro Forma
	Year Ended June 30,
(Dollars in thousands)	2022		2021
Non-interest income	$	32,949	$	30,395

It is not practical to disclose net income on ~~goodwill~~a pro forma basis as the assets and ~~other intangible assets.~~liabilities acquired are a component of a business.

F-19

3. FAIR VALUE

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



Level 1:						Quoted prices in active markets for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Level 2:						Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets include securities with quoted prices that are traded less frequently than exchange-traded instruments and whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data.

Level 3:						Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models such as discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

When available, the Company generally uses quoted market prices to determine fair value. In some cases where a market price is available, the Company will make use of acceptable practical expedients (such as matrix pricing) to calculate fair value, in which case the items are classified in Level 2.

The Company considers relevant and observable market prices in its valuations where possible. The frequency of transactions, the size of the bid-ask spread and the nature of the participants are some of the factors the Company uses to help determine whether a market is active and orderly or inactive and not orderly. Price quotes based upon transactions that are not orderly are not considered to be determinative of fair value and are given little, if any, weight in measuring fair value.

If quoted market prices are not available, fair value is based upon internally developed valuation techniques that use, where possible, current market-based or independently sourced market parameters, such as interest rates, credit spreads, housing value forecasts, etc. Items valued using such internally generated valuation techniques are classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be some significant inputs that are readily observable.

The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair-value hierarchy in which each instrument is generally classified:

Securities—trading and available-for-sale. Trading securities are recorded at fair value. Available-for-sale securities are recorded at fair value and consist of ~~residential~~ mortgage-backed securities (“~~RMBS”~~MBS”) issued by U.S. ~~agencies, RMBS~~government-backed, including Ginne Mae, or government-sponsored enterprises including Fannie Mae and Freddie Mac (“agency”), MBS issued by non-agencies, municipal securities as well as other ~~Non-RMBS~~Non-MBS securities. Fair value for ~~U.S.~~ agency securities and municipal securities are generally based on quoted market prices of similar securities used to form a dealer quote or a pricing matrix. These securities are classified in Level 2. There continues to be significant illiquidity in the market for ~~RMBS~~MBS issued by non-agencies, impacting the availability and reliability of transparent pricing. As orderly quoted market prices are not available, the Level 3 fair values for these securities are determined by the Company utilizing industry-standard tools to calculate the net present value of the expected cash flows available to the securities from the underlying mortgage assets. The Company computes Level 3 fair values for each non-agency ~~RMBS~~MBS in the same manner (as described below) whether available-for-sale or held-to-maturity.

To determine the performance of the underlying mortgage loan pools, the Company estimates prepayments, defaults, and loss severities based on a number of macroeconomic factors, including housing price changes, unemployment rates, interest rates and borrower attributes such as credit score and loan documentation at the time of origination. The Company inputs for each security a projection of monthly default rates, loss severity rates and voluntary prepayment rates for the underlying mortgages for the remaining life of the security to determine the expected cash flows. The projections of default rates are derived by the Company from the historic default rate observed in the pool of loans collateralizing the security, increased by and decreased by the forecasted increase or decrease in the national unemployment rate. The projections of loss severity rates are derived by the Company from the historic loss severity rate observed in the pool of loans, increased by or decreased by the forecasted increase or decrease in the national home price appreciation (“HPA”) index. The largest factors influencing the

F-20

Company’s modeling of the monthly default rate are unemployment and HPA, as a strong correlation exists. The most updated unemployment rate reported in ~~May 2019~~June 2022 was 3.6%. Consensus estimates for unemployment are that the rate will ~~begin~~continue to ~~increase. Going forward, the~~decrease. The Company agrees with consensus estimates and thus is projecting lower monthly default rates. The Company projects that severities will continue to ~~improve.~~improve as HPA improves.

To determine the discount rates used to compute the present value of the expected cash flows for these non-agency ~~RMBS~~MBS securities, the Company separates the securities by the borrower characteristics in the underlying pool. Specifically, “prime” securities generally have borrowers with higher FICO scores and better documentation of income. “Alt-A” securities generally have borrowers with a lower FICO and less documentation of income. “Pay-option ARMs” are Alt-A securities with borrowers that tend to pay the least amount of principal (or increase their loan balance through negative amortization). The Company calculates separate discount rates for prime, Alt-A and Pay-option ARM non-agency ~~RMBS~~MBS securities using market-participant assumptions for risk, capital and return on equity. The range of annual default rates used in the Company’s projections at June 30, 2019 are from 1.5% up to 10.2%. The range of loss severity rates applied to each default used in the Company’s projections at June 30, 2019 are from 40.0% up to 68.3% based upon individual bond historical performance. The default rates and the severities are projected for every non-agency ~~RMBS~~MBS security held by the Company and will vary monthly based upon the actual performance of the security and the macroeconomic factors discussed above. Based upon the actual performance of the underlying collateral, the securities’ credit enhancement will be impacted. The range of existing credit enhancement is from 0.0% to 96.5%, with a weighted average credit enhancement 19.7%. The Company applies its discount rates to the projected monthly cash flows, which already reflect the full impact of all forecasted losses using the assumptions described above. When calculating present value of the expected cash flows at June 30, ~~2019,~~2022, the Company computed its discount rates as a spread between ~~272~~273 and ~~686~~928 basis points over the LIBOR Index using the LIBOR forward curve.

The Bank’s estimate of fair value for non-agency securities using Level 3 pricing is highly subjective and is based on the Bank’s estimate of voluntary prepayments, default rates, severities and discount margins, which are forecasted monthly over the remaining life of each security. Changes in one or more of these assumptions can cause a significant change in the estimated fair value. For further details see the table later in this note that summarizes quantitative information about level 3 fair value measurements.

Loans Held for Sale. Loans held for sale at fair value are primarily single-family residential loans. The fair value of residential loans held for sale is determined by pricing for comparable assets or by existing forward sales commitment prices with investors.

~~Impaired Loans and Leases. Impaired~~ These loans ~~and leases~~held for sale are loans and leases which are inadequately protected by the current net worth and paying capacity of the borrowers or the collateral pledged. The accrual of interest income has been discontinued for impaired loans and leases. The impaired loans and leases are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. The Company assesses loans and leases individually and identifies impairment when the loan or lease is classified as impaired or has been restructured or management has serious doubts about the future collectibility of principal and interest, even though the loans and leases may currently be performing. The fair value of an impaired loan or lease is determined based on an observable market price or current appraised value of the underlying collateral. The fair value of impaired loans and leases with specific write-offs or allocations of the allowance for loan and lease losses are generally based on recent real estate appraisals or internal valuation analyses consistent with the methodology used in real estate appraisals and include other third-party valuations and analysis of cash flows. These appraisals and analyses are updated at least on an annual basis. The Company primarily obtains real estate appraisals and in the rare cases where an appraisal cannot be obtained, the Company performs an internal valuation analysis. These appraisals and analyses may utilize a single valuation approach or a combination of approaches including comparable sales and income approaches. The sales comparison approach uses at least three recent similar property sales to help determine the fair value of the property being appraised. The income approach is calculated by taking the net operating income generated by the collateral property of the rent collected and dividing it by an assumed capitalization rate. Adjustments are routinely made in the process by the appraisers to account for differences between the comparable sales and income data available. When measuring the fair value of the impaired loan or lease based upon the projected sale of the underlying collateral, the Company subtracts the costs expected to be incurred for the transfer of the underlying collateral, which includes items such as sales commissions, delinquent taxes and insurance premiums. These adjustments to the estimated fair value of nonaccrual loans and leases may result in increases or decreases to the provision for loan and lease losses recorded in current earnings. Such adjustments are typically significant and result in aunder Level ~~3 classification for the inputs for determining fair value.~~2.

Other Real Estate Owned and Repossessed Vehicles. Non-recurring adjustments to certain commercial and residential real estate properties classified as other real estate owned (“OREO”) are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.

Mortgage Servicing Rights. The Company initially records all mortgage servicing rights (“MSRs”) at fair value and accounts for MSRs at fair value during the life of the MSR, with changes in fair value recorded through mortgage banking income in the income statement. Fair value ~~adjustments encompass~~is derived from market-driven valuation changes as well as modeled amortization involving the run-off of value that occurs due to the passage of time as individual loans are paid by borrowers. Market expectations about loan duration, and correspondingly the expected term of future servicing cash flows, may vary from time to time due to changes in expected prepayment activity, especially when interest rates rise or fall. Market expectations of increased loan prepayment speeds may negatively impact the fair value of the single family MSRs. Fair value is also dependent on the discount rate used in calculating present value, which is ~~imputed~~input from observable market activity, ~~and~~ market participants, and results in Level 3 classification. Management reviews and adjusts the discount rate on an ongoing basis. An increase in the discount rate would reduce the estimated fair value of the MSRs asset.

Mortgage Banking Derivatives. In connection with mortgage banking activities, the Company enters into commitments to fund mortgage loans (interest rate locks) and forward sale commitments for the future delivery of these mortgage loans. If interest rates increase, the value of the Company’s interest rate locks are adversely impacted. The Company attempts to economically hedge the risk of the overall change in the fair value of interest rate locks with forward sales commitments.

The fair value of interest rate locks is estimated based on changes in to be announced (“TBA”) values which are based upon mortgage interest rates from the date the interest on the loan is locked, adjusted for items such as estimated fallout and costs to originate the loan. These are classified under level 3.

The fair value of forward sale commitments is based upon prices in active secondary markets for identical securities or based on quoted market prices of similar assets used to form a dealer quote or a pricing matrix. If no such quoted price exists, the fair value of a commitment is determined by quoted prices for a similar commitment or commitments, adjusted for the specific attributes of each commitment. These are classified under level 3.

F-21

FAIR VALUE - RECURRING BASIS

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


	June 30, 2022
(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
ASSETS:
Securities—Trading: Municipal	$	—	$	1,758	$	—	$	1,758
Securities—Available-for-Sale:

Agency MBS1	—		25,325		—		25,325
Non-Agency MBS2	—		—		186,814		186,814
Municipal	—		3,248		—		3,248
Asset-backed securities and structured notes	—		47,131		—		47,131
Total—Securities—Available-for-Sale	$	—	$	75,704	$	186,814	$	262,518
Loans Held for Sale	$	—	$	4,973	$	—	$	4,973
Mortgage servicing rights	$	—	$	—	$	25,213	$	25,213
Other assets—Derivative instruments	$	—	$	—	$	464	$	464
LIABILITIES:
Other liabilities—Derivative instruments	$	—	$	—	$	—	$	—


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

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

June 30, 2019
(Dollars in thousands)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
ASSETS:
Securities—Available-for-Sale:
Agency Debt $ —
$ 1,685
$ —
$ 1,685
Agency RMBS —
9,586
—
9,586
Non-Agency RMBS —
—
13,025
13,025
Municipal —
21,162
—
21,162
Asset-backed securities and structured notes —
182,055
—
182,055
Total—Securities—Available-for-Sale $ —
$ 214,488
$ 13,025
$ 227,513
Loans Held for Sale $ —
$ 33,260
$ —
$ 33,260
Mortgage servicing rights $ —
$ —
$ 9,784
$ 9,784
Other assets—Derivative instruments $ —
$ —
$ 1,978
$ 1,978
LIABILITIES:
Other liabilities—Derivative instruments $ —
$ —
$ 732
$ 732

June 30, 2018
(Dollars in thousands)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable
Inputs
(Level 3)
Total
ASSETS:
Securities—Available-for-Sale:
Agency RMBS $ —
$ 12,926
$ —
$ 12,926
Non-Agency RMBS —
—
17,443
17,443
Municipal —
20,212
—
20,212
Asset-backed securities and structured notes —
129,724
—
129,724
Total—Securities—Available-for-Sale $ —
$ 162,862
$ 17,443
$ 180,305
Loans Held for Sale $ —
$ 35,077
$ —
$ 35,077
Mortgage servicing rights $ —
$ —
$ 10,752
$ 10,752
Other assets—Derivative Instruments $ —
$ —
$ 1,321
$ 1,321
LIABILITIES:
Other liabilities—Derivative instruments $ —
$ —
$ 368
$ 368
1Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac.

2Private sponsors of securities collateralized primarily by first - lien mortgage loans on commercial properties or by pools of 1-4 family residential first mortgages. Primarily super senior securities secured by Alt-A or pay-option ARM mortgages.

F-22

The following ~~table presents~~tables present additional information about assets measured at fair value on a recurring basis and for which the Company has utilized Level 3 inputs to determine fair value:


	Year Ended June 30, 2022
(Dollars in thousands)	Securities- Available-for- Sale: Non- Agency MBS		Mortgage Servicing Rights1		Derivative Instruments, net		Total
Assets:
Opening Balance	$	67,615	$	17,911	$	2,205	$	87,731
Transfers into Level 3	—		—		—		—
Transfers out of Level 3	—		—		—		—
Total gains or losses for the period:


Included in earnings—Mortgage banking income	—		2,278		(1,741)		537
Included in other comprehensive income	(3,244)		—		—		(3,244)
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	131,446		5,024		—		136,470


Settlements	(9,003)		—		—		(9,003)

Closing balance	$	186,814	$	25,213	$	464	$	212,491
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	2,278	$	(1,741)	$	537

Year Ended June 30, 2019
(Dollars in thousands) Securities-
Trading:
Collateralized
Debt
Obligations Securities-
Available-for-
Sale: Non-
Agency RMBS Mortgage Servicing Rights Derivative Instruments, net Total
Assets:
Opening Balance $ —
$ 17,443
$ 10,752
$ 953
$ 29,148
Transfers into Level 3 —
—
—
—
—
Transfers out of Level 3 —
—
—
—
—
Total gains or losses for the period:
Included in earnings—Sale of securities —
(133 ) —
—
(133 )
Included in earnings—Fair value gain(loss) on trading securities —
—
—
—
—
Included in earnings—Mortgage banking income —
—
(3,362 ) 293
(3,069 )
Included in other comprehensive income —
766
—
—
766
Purchases, issues, sales and settlements:
Purchases —
—
2,394
—
2,394
Issues —
—
—
—
—
Sales —
(2,058 ) —
—
(2,058 )
Settlements —
(2,172 ) —
—
(2,172 )
Other-than-temporary impairment —
(821 ) —
—
(821 )
Closing balance $ —
$ 13,025
$ 9,784
$ 1,246
$ 24,055
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period $ —
$ (133 ) $ (3,362 ) $ 293
$ (3,202 )
1 Earnings from mortgage servicing rights were attributable to: Time and payoffs, representing a decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $4.1 million, and an increase in MSR value resulting from market-driven changes in interest rates of $6.4 million. Additions to mortgage servicing rights were retained upon sale of loans held for sale.


	Year Ended June 30, 2021
(Dollars in thousands)	Securities- Available-for- Sale: Non- Agency MBS		Mortgage Servicing Rights1		Derivative Instruments, net		Total
Assets:
Opening Balance	$	18,332	$	10,675	$	7,416	$	36,423
Transfers into Level 3	—		—		—		—
Transfers out of Level 3	—		—		—		—
Total gains or losses for the period:


Included in earnings—Mortgage banking income	—		(6,319)		(5,211)		(11,530)
Included in other comprehensive income	2,289		—		—		2,289
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	49,245		13,555		—		62,800


Settlements	(2,251)		—		—		(2,251)

Closing balance	$	67,615	$	17,911	$	2,205	$	87,731
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	(6,319)	$	(5,211)	$	(11,530)

1 Earnings from mortgage servicing rights were attributable to: Time and payoffs, representing a decrease in MSR value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $7.2 million, and an increase in MSR value resulting from market-driven changes in interest rates of $0.9 million. Additions to mortgage servicing rights were retained upon sale of loans held for sale.

F-23

Year Ended June 30, 2018
(Dollars in thousands) Securities-
Trading:
Collateralized
Debt
Obligations Securities-
Available-for-
Sale: Non-
Agency RMBS Mortgage Servicing Rights Derivative Instruments, net Total
Assets:
Opening Balance $ 8,327
$ 71,503
$ 7,200
$ 1,026
$ 88,056
Transfers into Level 3 —
—
—
—
—
Transfers out of Level 3 —
—
—
—
—
Total gains or losses for the period:
Included in earnings—Sale of securities 282
(300 ) —
—
(18 )
Included in earnings—Fair value gain(loss) on trading securities —
—
—
—
—
Included in earnings—Mortgage banking income —
—
(83 ) (73 ) (156 )
Included in other comprehensive income —
(1,629 ) —
—
(1,629 )
Purchases, issues, sales and settlements:
Purchases —
—
3,635
—
3,635
Issues —
—
—
—
—
Sales (8,609 ) (44,270 ) —
—
(52,879 )
Settlements —
(7,705 ) —
—
(7,705 )
Other-than-temporary impairment —
(156 ) —
—
(156 )
Closing balance $ —
$ 17,443
$ 10,752
$ 953
$ 29,148
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period $ —
$ (300 ) $ (83 ) $ (73 ) $ (456 )

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

June 30, 2022

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Inputs

Range and Weighted Average

Securities – Non-agency MBS

186,814

Discounted Cash Flow

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

0.0 to 30.0% (21.4%)

0.0 to 7.9% (2.2%)

0.0 to 68.4% (26.7%)

2.7 to 9.3% (2.8%)

Mortgage Servicing Rights

25,213

Discounted Cash Flow

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

7.9 to 56.3% (11.0%)

1.2 to 9.9 (8.4)

9.5 to 11.5% (9.5%)

Derivative Instruments

464

Sales Comparison Approach

Projected Sales Profit of Underlying Loans

-3.1 to 0.8% (-1.2%)

June 30, 2019
(Dollars in thousands) Fair Value Valuation Technique Unobservable Inputs Range (Weighted Average)
Securities – Non-agency RMBS $ 13,025
Discounted Cash Flow
Projected Constant Prepayment Rate,
Projected Constant Default Rate,
Projected Loss Severity,
Discount Rate over LIBOR
2.9 to 32.5% (10.0%)
1.5 to 10.2% (4.4%)
40.0 to 68.3% (59.4%)
2.7 to 6.9% (4.1%)
Mortgage Servicing Rights $ 9,784
Discounted Cash Flow
Projected Constant Prepayment Rate,
Life (in years),
Discount Rate
4.7 to 33.7% (10.1%)
1.9 to 8.8 (6.4)
9.5 to 13.0% (9.8%)
Derivative Instruments $ 1,246
Sales Comparison Approach Projected Sales Profit of Underlying Loans 0.4 to 0.8% (0.6%)

June 30, 2018
(Dollars in thousands) Fair Value Valuation Technique Unobservable Inputs Range (Weighted Average)
Securities – Non-agency RMBS $ 17,443
Discounted Cash Flow Projected Constant Prepayment Rate,
Projected Constant Default Rate,
Projected Loss Severity,
Discount Rate over LIBOR 2.5 to 25.8% (14.1%)
1.5 to 10.6% (5.1%)
40.0 to 68.0% (58.9%)
2.7 to 7.1% (4.2%)
Mortgage Servicing Rights $ 10,752
Discounted Cash Flow Projected Constant Prepayment Rate,
Life (in years),
Discount Rate 6.0 to 26.6% (9.1%)
2.4 to 9.5 (6.9)
9.5 to 13.0% (9.9%)
Derivative Instruments $ 953
Sales Comparison Approach Projected Sales Profit of Underlying Loans 0.1 to 0.4% (0.3%)

June 30, 2021

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Inputs

Range and Weighted Average

Securities – Non-agency MBS

67,615

Discounted Cash Flow

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

0.0 to 25.0% (2.7%)

0.0 to 5.6% (0.6%)

0.0 to 100.0% (19.4%)

2.7 to 7.2% (3.1%)

Mortgage Servicing Rights

17,911

Discounted Cash Flow

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

7.5 to 37.4% (11.5%)

1.7 to 7.5 (6.4)

9.5 to 13.0% (9.6%)

Derivative Instruments

2,205

Sales Comparison Approach

Projected Sales Profit of Underlying Loans

0.2 to 0.5% (0.3%)

The significant unobservable inputs used in the fair value measurement of the Company’s ~~residential~~ mortgage-backed securities are projected prepayment rates, probability of default, and projected loss severity in the event of default. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the projected loss severity and a directionally opposite change in the assumption used for projected prepayment rates.

~~The table below summarizes changes in unrealized gains and losses and interest income recorded in earnings for Level 3 trading assets and liabilities that are still held at the periods indicated:~~

Year Ended June 30,
(Dollars in thousands) 2019 2018 2017
Interest income on investments $ —
$ —
$ 311
Fair value adjustment —
—
743
Total $ —
$ —
$ 1,054

The table below summarizes the fair value of assets measured for impairment on a non-recurring basis:

June 30, 2019
(Dollars in thousands)
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3)
Balance
Impaired loans and leases:
Single family real estate secured:
Mortgage $ —
$ —
$ 46,005
$ 46,005
Multifamily real estate secured —
—
2,108
2,108
Auto and RV secured —
—
115
115
Other —
—
216
216
Total $ —
$ —
$ 48,444
$ 48,444
Other real estate owned and foreclosed assets:
Single family real estate $ —
$ —
$ 7,449
$ 7,449
Autos and RVs —
—
36
36
Total $ —
$ —
$ 7,485
$ 7,485

June 30, 2018
(Dollars in thousands) Quoted Prices in
Active Markets for
Identical Assets
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable Inputs
(Level 3) Balance
Impaired loans and leases:
Single family real estate secured:
Mortgage $ —
$ —
$ 28,446
$ 28,446
Home equity —
—
16
16
Multifamily real estate secured —
—
232
232
Auto and RV secured —
—
60
60
Commercial & Industrial —
—
2,361
2,361
Other —
—
111
111
Total $ —
$ —
$ 31,226
$ 31,226
Other real estate owned and foreclosed assets:
Single family real estate $ —
$ —
$ 9,385
$ 9,385
Autos and RVs —
—
206
206
Total $ —
$ —
$ 9,591
$ 9,591


	June 30, 2022
(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Other real estate owned and foreclosed assets:




Autos & RVs	$	—	$	—	$	798	$	798
Total	$	—	$	—	$	798	$	798


	June 30, 2021
(Dollars in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance
Other real estate owned and foreclosed assets:
Single family real estate	$	—	$	—	$	6,547	$	6,547




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

Impaired loans and leases measured for impairment on a non-recurring basis using the fair value of the collateral for collateral-dependent loans have a carrying amount of $48,444 at June 30, 2019 and life to date charge-offs of $3,503. Impaired loans had a related allowance of $422 at June 30, 2019. At June 30, 2018, such impaired loans had a carrying amount of $31,226 and life to date charge-offs of $3,294, and a related allowance of $278.

Other real estate owned and foreclosed assets, which are measured at the lower of carrying value or fair value less costs to sell, had a net carrying amount of ~~$7,485~~$0.8 million after charge-offs of ~~$1,008~~$0.1 million at June 30, ~~2019.~~2022. Our other real estate owned and foreclosed assets had a net carrying amount was ~~$9,591~~$6.8 million after charge-offs of ~~$301~~$0.1 million during the year ended June 30, ~~2018~~2021.

The Company has elected the fair value option for Agency loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due nor on non-accrual as of June 30, 2019 and June 30, 2018.

F-24

The aggregate fair value, contractual balance (including accrued interest), and unrealized gain for loans held for sale was as follows:


	At June 30,							At June 30,
(Dollars in thousands)	2019		2018		2017		(Dollars in thousands)	2022		2021		2020
Aggregate fair value	$	33,260	$	35,077	$	18,738	Aggregate fair value	$	4,973	$	29,768	$	51,995
Contractual balance	32,342		34,415		18,311		Contractual balance	4,881		28,940		49,700
Gain	$	918	$	662	$	427
Unrealized gain							Unrealized gain	$	92	$	828	$	2,295

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

At June 30,
(Dollars in thousands) 2019 2018 2017
Interest income $ 1,006
$ 903
$ 602
Change in fair value 544
181
(514 )
Total $ 1,550
$ 1,084
$ 88


	At June 30,
(Dollars in thousands)	2022		2021		2020
Interest income	$	739	$	1,411	$	1,113
Change in fair value	(2,474)		(6,680)		7,531
Total	$	(1,735)	$	(5,269)	$	8,644

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

June 30, 2019
(Dollars in thousands) Fair Value Valuation Technique Unobservable Input
Range (Weighted Average)¹
Impaired loans and leases:
Single family real estate secured: Mortgage $ 46,005
Sales comparison approach Adjustment for differences between the comparable sales -83.2 to 80.0% (-2.0%)
Multifamily real estate secured $ 2,108
Sales comparison approach and income approach Adjustment for differences between the comparable sales and adjustments for differences in net operating income expectations, capitalization rate
-87.9 to 102.7% (-0.1%)

Auto and RV secured $ 115
Sales comparison approach Adjustment for differences between the comparable sales
-49.0 to 24.0% (2.6%)

Other $ 216
Discounted cash flow
Projected Constant Prepayment Rate,
Projected Constant Default Rate,
Projected Loss Severity,
Discount Rate
0.0 to 0.0% (0.0%)
0.0 to 10.0% (5.0%)
100.0 to 100.0% (100.0%)
-2.2 to 1.1% (-0.6%)

Other real estate owned and foreclosed assets:
Single family real estate $ 7,449
Sales comparison approach Adjustment for differences between the comparable sales
-46.3 to 53.0% (5.3%)

Autos and RVs $ 36
Sales comparison approach Adjustment for differences between the comparable sales
-13.6 to 56.3% (8.0%)

June 30, 2022

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)1

Other real estate owned and foreclosed assets:

Autos and RVs

798

Sales comparison approach

Adjustment for differences between the comparable sales

-17.2 to 4.6% (-7.5%)

¹For ~~impaired loans and~~ other real estate owned and foreclosed assets, the ranges shown may vary positively or negatively based on the comparable sales reported in the current appraisal. In certain instances, the range can be significant due to small sample sizes and in some cases the property being valued having limited comparable sales with similar characteristics at the time the current appraisal is conducted.

June 30, 2018
(Dollars in thousands) Fair Value Valuation Technique Unobservable Input
Range (Weighted Average)¹
Impaired loans and leases:
Single family real estate secured:
Mortgage $ 28,446
Sales comparison approach Adjustment for differences between the comparable sales -48.8 to 66.7% (2.3%)
Home equity $ 16
Sales comparison approach Adjustment for differences between the comparable sales 0.0 to 14.9% (7.4%)
Multifamily real estate secured $ 232
Sales comparison approach and income approach Adjustment for differences between the comparable sales and adjustments for differences in net operating income expectations, capitalization rate -15.5 to 46.4% (15.4%)
Auto and RV secured $ 60
Sales comparison approach Adjustment for differences between the comparable sales -2.0 to 71.5% (24.0%)
Commercial & Industrial $ 2,361
Discounted cash flow Discount Rate -33.8 to 0.0% (-16.9%)
Other $ 111
Discounted cash flow Projected Constant Prepayment Rate,
Projected Constant Default Rate,
Projected Loss Severity,
Discount Rate 0.0 to 0.0% (0.0%)
0.0 to 10.0% (5.0%)
100.0 to 100.0% (100.0%)
-1.0 to 2.5% (0.8%)
Other real estate owned and foreclosed assets:
Single family real estate $ 9,385
Sales comparison approach Adjustment for differences between the comparable sales -14.1 to 27.3% (0.5%)
Autos and RVs $ 206
Sales comparison approach Adjustment for differences between the comparable sales -33.9 to 60.5% (7.9%)

June 30, 2021

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)1

Other real estate owned and foreclosed assets:

Single family real estate

6,547

Sales comparison approach

Adjustment for differences between the comparable sales

-1.5 to 6.1% (2.0%)

Autos & RVs

235

Sales comparison approach

Adjustment for differences between the comparable sales

-2.1 to 14.7% (-2.1%)

F-25

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount and estimated fair values of financial instruments at year-end were as follows:


	June 30, 2022
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:
Cash, cash equivalents, cash segregated, and federal funds sold	$	1,574,699	$	1,574,699	$	—	$	—	$	1,574,699
Securities trading	1,758		—		1,758		—		1,758
Securities available-for-sale	262,518		—		75,704		186,814		262,518

Loans held for sale, at fair value	4,973		—		4,973		—		4,973
Loans held for sale, at lower of cost or fair value	10,938		—		—		10,985		10,985
Loans held for investment—net	14,091,061		—		—		14,015,157		14,015,157
Securities borrowed	338,980		—		—		329,963		329,963
Customer, broker-dealer and clearing receivables	417,417		—		—		414,383		414,383

Mortgage servicing rights	25,213		—		—		25,213		25,213
Financial liabilities:
Total deposits	13,946,422		—		12,812,512		—		12,812,512

Advances from the Federal Home Loan Bank	117,500		—		117,500		—		117,500
Borrowings, subordinated notes and debentures	445,244		—		416,947		—		416,947
Securities loaned	474,400		—		—		473,831		473,831
Customer, broker-dealer and clearing payables	511,654		—		—		471,859		471,859

June 30, 2019
(Dollars in thousands) Carrying
Amount Level 1 Level 2 Level 3 Total Fair Value
Financial assets:
Cash and cash equivalents $ 857,368
$ 857,368
$ —
$ —
$ 857,368
Securities available-for-sale 227,513
—
214,488
13,025
227,513
Loans held for sale, at fair value 33,260
—
33,260
—
33,260
Loans held for sale, at lower of cost or fair value 4,800
—
—
4,990
4,990
Loans and leases held for investment—net 9,382,124
—
—
9,630,061
9,630,061
Securities borrowed 144,706
—
—
144,720
144,720
Customer, broker-dealer and clearing receivables 203,192
—
—
203,355
203,355
Accrued interest receivable 38,988
—
—
38,988
38,988
Mortgage servicing rights 9,784
—
—
9,784
9,784
Financial liabilities:
Total deposits 8,983,173
—
8,758,861
—
8,758,861
Advances from the Federal Home Loan Bank 458,500
—
461,156
—
461,156
Borrowings, subordinated notes and debentures 168,929
—
169,212
—
169,212
Securities loaned 198,356
—
—
198,197
198,197
Customer, broker-dealer and clearing payables 238,604
—
—
229,987
229,987
Accrued interest payable 2,882
—
2,882
—
2,882


	June 30, 2018											June 30, 2021
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value		(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:											Financial assets:
Cash and cash equivalents	$	622,850	$	622,850	$	—	$	—	$	622,850
Cash, cash equivalents, cash segregated, and federal funds sold											Cash, cash equivalents, cash segregated, and federal funds sold	$	1,037,777	$	1,037,777	$	—	$	—	$	1,037,777
Securities trading	180,305		—		162,862		17,443		180,305		Securities trading	1,983		—		1,983		—		1,983
Securities available-for-sale											Securities available-for-sale	187,335		—		119,720		67,615		187,335
Loans held for sale, at fair value	35,077		—		35,077		—		35,077		Loans held for sale, at fair value	29,768		—		29,768		—		29,768
Loans held for sale, at lower of cost or fair value	2,686		—		—		2,734		2,734		Loans held for sale, at lower of cost or fair value	12,294		—		—		12,336		12,336
Loans and leases held for investment—net	8,432,289		—		—		8,466,494		8,466,494		Loans and leases held for investment—net	11,414,814		—		—		11,833,102		11,833,102
Accrued interest receivable	26,729		—		—		26,729		26,729
Securities borrowed											Securities borrowed	619,088		—		—		619,274		619,274
Customer, broker-dealer and clearing receivables											Customer, broker-dealer and clearing receivables	369,815		—		—		369,815		369,815

Mortgage servicing rights	10,752		—		—		10,752		10,752		Mortgage servicing rights	17,911		—		—		17,911		17,911
Financial liabilities:											Financial liabilities:
Total deposits	7,985,350		—		7,584,928		—		7,584,928		Total deposits	10,815,797		—		10,297,450		—		10,297,450
Advances from the Federal Home Loan Bank	457,000		—		453,326		—		453,326		Advances from the Federal Home Loan Bank	353,500		—		353,500		—		353,500
Subordinated notes and debentures	54,552		—		51,693		—		51,693
Accrued interest payable	1,753		—		1,753		—		1,753
Borrowings, subordinated notes and debentures											Borrowings, subordinated notes and debentures	221,358		—		210,196		—		210,196
Securities loaned											Securities loaned	728,988		—		—		731,467		731,467
Customer, broker-dealer and clearing payables											Customer, broker-dealer and clearing payables	535,425		—		—		535,425		535,425

The methods and assumptions, not previously presented, used to estimate fair value are described as follows: Carrying amount is the estimated fair value for cash and cash equivalents, interest bearing deposits, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans ~~and leases~~ or deposits that reprice frequently and fully. For fixed rate loans, ~~and leases,~~ deposits, borrowings or subordinated debt and for variable rate loans, ~~and leases,~~ deposits, borrowings or subordinated debt with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. A discussion of the methods of valuing trading securities, available for sale securities and loans held for sale can be found earlier in this footnote. The carrying amount of stock of regulatory agencies approximates the estimated fair value of this investment. The fair value of off-balance sheet items is not considered material.

F-26

4. SECURITIES

The amortized cost, carrying amount and fair value for the securities available-for-sale for the following periods were:


	June 30, 2022
	Trading		Available-for-sale
(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (MBS):
Agencies1	$	—	$	27,722	$	9	$	(2,406)	$	25,325
Non-agency2	—		187,616		1,832		(2,634)		186,814
Total mortgage-backed securities	—		215,338		1,841		(5,040)		212,139
Non-MBS:

Municipal	1,758		3,529		—		(281)		3,248
Asset-backed securities and structured notes	—		47,000		131		—		47,131
Total Non-MBS	1,758		50,529		131		(281)		50,379
Total debt securities	$	1,758	$	265,867	$	1,972	$	(5,321)	$	262,518

June 30, 2019
Available-for-sale
(Dollars in thousands)
Amortized
Cost

Unrealized
Gains

Unrealized
Losses

Fair
Value
Mortgage-backed securities (RMBS):
U.S agencies¹
$ 9,486
$ 179
$ (79 ) $ 9,586
Non-agency²
13,489
226
(690 ) 13,025
Total mortgage-backed securities 22,975
405
(769 ) 22,611
Non-RMBS:
U.S. agencies¹
1,682
3
—
1,685
Municipal 21,974
16
(828 ) 21,162
Asset-backed securities and structured notes 179,976
2,088
(9 ) 182,055
Total Non-RMBS 203,632
2,107
(837 ) 204,902
Total debt securities $ 226,607
$ 2,512
$ (1,606 ) $ 227,513


	June 30, 2018										June 30, 2021
	Available-for-sale										Trading		Available-for-sale
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value		(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (RMBS):
U.S. agencies¹	$	13,102	$	152	$	(328	)	$	12,926
Mortgage-backed securities (MBS):										Mortgage-backed securities (MBS):
Agencies1										Agencies1	$	—	$	23,639	$	420	$	(146)	$	23,913
Non-agency²	19,384		116		(2,057		)	17,443		Non-agency2	—		65,174		2,862		(421)		67,615
Total mortgage-backed securities	32,486		268		(2,385		)	30,369		Total mortgage-backed securities	—		88,813		3,282		(567)		91,528
Non-RMBS:
Non-MBS:										Non-MBS:

Municipal	20,953		2		(743		)	20,212		Municipal	1,983		3,466		99		—		3,565
Asset-backed securities and structured notes	127,558		2,267		(101		)	129,724		Asset-backed securities and structured notes	—		90,549		1,693		—		92,242
Total Non-RMBS	148,511		2,269		(844		)	149,936
Total Non-MBS										Total Non-MBS	1,983		94,015		1,792		—		95,807
Total debt securities	$	180,997	$	2,537	$	(3,229	)	$	180,305	Total debt securities	$	1,983	$	182,828	$	5,074	$	(567)	$	187,335

~~The Company records unrealized gains and unrealized losses in accumulated other comprehensive loss as follows:~~

At June 30,
(Dollars in thousands) 2019 2018
Available-for-sale debt securities—net unrealized gains $ 905
$ (692 )
Available-for-sale debt securities—non-credit related (845 ) —
Subtotal 60
(692 )
Tax (provision) benefit (44 ) 79
Net unrealized gain (loss) on investment securities in accumulated other comprehensive loss $ 16
$ (613 )

~~The expected maturity distribution of the Company’s mortgage-backed securities and the contractual maturity distribution of the Company’s Non-RMBS securities:~~

June 30, 2019
Available-for-sale
(Dollars in thousands)
Amortized
Cost

Fair
Value
RMBS—U.S. agencies¹:

Due within one year $ 862
$ 861
Due one to five years 2,905
2,917
Due five to ten years 2,674
2,708
Due after ten years 3,045
3,100
Total RMBS—U.S. agencies¹
9,486
9,586
RMBS—Non-agency:
Due within one year 1,877
1,820
Due one to five years 5,938
5,699
Due five to ten years 3,824
3,659
Due after ten years 1,850
1,847
Total RMBS—Non-agency 13,489
13,025
Non-RMBS:
Due within one year 22,552
23,279
Due one to five years 168,208
169,578
Due five to ten years 8,266
7,613
Due after ten years 4,606
4,432
Total Non-RMBS 203,632
204,902
Total $ 226,607
$ 227,513

¹~~Residential mortgage-backed security (RMBS) distributions include impact of expected prepayments and other timing factors.~~

5. LOANS ~~LEASES~~ & ALLOWANCE FOR ~~LOAN AND LEASE LOSSES~~CREDIT LOSSES-LOANS

~~For~~In conjunction with the Company’s single family, commercial and multifamily loans, the allowance methodology takes into consideration the risk that the original borrower information may have adversely changed in two ways. First, in calculating the quantitative factor for the Company’s general loan and lease loss allowance, the actual loss experience is tracked and stratified by original LTV and yearadoption of ~~origination. As a result,~~ASC 326 on July 1, 2020, the Company uses relatively higher loss rates across the LTV bands for loans originated and purchased in years 2005 through 2008 compared to the same LTV ranges for loans originated before 2005 or after 2008. Second, the Company uses a number of qualitative factors to reflect additional risk. One qualitative loss factor is real estate valuation risk which is applied to each LTV band primarily based upon the year the real estate loan was originated or purchased. Based upon price appreciation indices, multifamily property values in years 2005 through 2008 experienced significant declines. As a result, the Company applies a relatively higher qualitative loss factor rate across the LTV bands for loans originated and purchased in years 2005 through 2008 compared to the same LTV ranges for loans originated or purchased before 2005 or after 2008. Lastly, the Company separates its allowance for loan and lease losses into loans originated and purchased categories in order to reflect the additional risk associated with purchased loans.

For the Company’s home equity loans, the allowance methodology takes into consideration the risk that the original borrower information may have adversely changed in two ways. First, in calculating the quantitative factor for the Company’s general loan loss allowance, the actual loss experience is tracked and stratified by original combined LTV (“CLTV”)updated categorization of the ~~first and second liens. As a result, the Company allocates higher loss rates in proportion to the greater the CLTV. Second, the Company uses a number of qualitative factors to reflect additional risk.~~loan portfolio. The Company ~~does not have any individual purchased home equity loans in its~~categorizes the loan portfolio into six segments: Single Family - Mortgage & Warehouse, Multifamily and ~~given the limited time frame under which the Company originated home equity loans, 2006-2009, no additional risk allocation is used.~~

For the Company’s single family – warehouse lines, the allowance methodology takes into consideration the structure of these loans, as they remain in the portfolio for a short period (usually less than a month)Commercial Mortgage, Commercial Real Estate, Commercial & Industrial - Non Real Estate, Auto & Consumer and have higher credit protection allocated compared to traditional single family originations. A matrix was created to reflect most current operating levels of capital and line usage, which calculates a loss rating to assign to each originator.

~~For the Company’s factoring loans, the allowance methodology takes into consideration the credit quality~~Other (for further detail of the ~~insurance company or state. The Company obtains credit ratings for these entities through agencies such as A.M. Best~~change in accounting principle and ~~allocates an allowance allocation based on these ratings.~~

For the Company’s C&I leveraged loans, equipment finance leases and bridge loans, the allowance methodology incorporates a loan level grading system, which generally aligns with the credit rating. Industry loss rates are applied to determine the loss allowance for each of these loans based upon their internal grading. The credit rating incorporates multiple borrower attributes including, but not limited to, underlying collateral and pledged assets, income generated by the property or assets, borrower’s liquidity and access to liquid funds, strengthdetail of the ~~borrower’s industry, stability of the borrower’s market, the size of the company, collateral diversity, facility exit strategies~~segments and borrower guarantees. Equipment direct finance leases are derecognized from the balance sheet and the net investment in the lease is recorded. This net investment is the sum of the present value of future lease payments and any unguaranteed residual value. Interest income is recorded using the effective interest rate of the lease.

For the Company’s automobile (“auto”) and recreational vehicle (“RV”) loan portfolio, the allowance methodology takes into consideration potential adverse changes to the borrower’s financial condition since time of origination. The general loan loss reserves for auto and RV are stratified based upon borrower FICO scores. First, to account for potential deterioration of borrower’s credit history since time of origination, due to downturn in the economy or other factors, the Company uses the origination FICO scores to drive the allowance on a semi-annual basis. The Company believes that current borrower credit history is a better predictor of potential loss than that was used at time of origination. Second, the Company uses qualitative factors such as; changes in the economy, volume, and changes in the underlying collateral to capture additional risk when finalizing its calculation of the allowance for loan and lease losses.

~~Loan and lease segment risk characteristics. The Company considers its loan and lease~~ classes ~~to be the same as its loan and lease segments. The following are loan and lease segment risk characteristics~~within of the Company’s loan ~~and lease portfolio:~~

~~Single family mortgage secured~~portfolio, refer to . The Company originates both fixed-rate and adjustable-rate loans secured by one-to-four family residences located in the U.S. The Company’s lending policies generally limit the maximum LTV ratio on one-to-four family loans to 80%Note 1 - “Summary of the lesser of the appraised value or the purchase price, plus pledged collateral. Terms of maturity typically range from 15 to 30 years. The Company attempts to mitigate residential lending risks by adhering to its underwriting policies in evaluating the collateral and the credit-worthiness of the borrower.

~~Home equity~~Significant Accounting Policies”). The Company also originates home equity lines of credit and second mortgage loans. Home equity lines of credit and second mortgage loans have a greater credit risk than one-to-four family residential mortgage loans because they are secured by mortgages subordinated to the existing first mortgage on the property, which may or may not be held by the Company. The Company

~~attempts to mitigate residential lending risks by adhering to its underwriting policies in evaluating the collateral and the credit-worthiness of the borrower.~~

~~Warehouse and other~~. Single family warehouse loans consist of short-term, secured advances to mortgage bankers on a revolving basis. These facilities enable the mortgage originators to close loans in their own names and temporarily finance inventories of closed mortgage loans until they can be sold to an approved investor. Commercial specialty and lender finance loans secured by single family real estate are originated to businesses secured by first liens on single family mortgage loans. These loans are generally collateralized by single family mortgage loans that are secured by first liens on single family real estate. The Company attempts to mitigate residential lending risks by adhering to its underwriting policies in evaluating the collateral and the credit-worthiness of the borrower.

~~Multifamily~~. The Company originates loans secured by multifamily real estate (more than four units). These loans involve a greater degree of risk than one-to-four family residential mortgage loans as these loans are usually greater in amount, dependent on the cash flow capacity of the project, and may be more difficult to evaluate and monitor. Repayment of loans secured by multifamily properties frequently depends on the successful operation and management of the properties. Consequently, repayment of such loans may be affected by adverse conditions in the real estate market or economy. The Company attempts to mitigate these risks by thoroughly evaluating the global financial condition of the borrower, the management experience of the borrower, and the quality of the collateral property securing the loan.

~~Commercial real estate~~. The Company originates loans across the U.S. secured by small commercial real estate properties. These are primarily cash flow loans that share characteristics of both real estate and commercial business loans. The primary source of repayment is frequently cash flow from the operation of the collateral property and secondarily through liquidation of the collateral. These loans are generally higher risk than other classifications of loans in that they typically involve higher loan amounts, are dependent on the management experience of the owners, and may be adversely affected by conditions in the real estate market or the economy. Owner-occupied commercial real estate loans are generally of lower credit risk than non-owner occupied commercial real estate loans as the borrowers’ businesses are likely dependent on the properties. Underwriting for these loans is primarily dependent on the repayment capacity derived from the operation of the occupying business rather than rents paid by third parties. The Company attempts to mitigate these risks by generally limiting the maximum LTV ratio to 65%-80%, depending on property type, and scrutinizing the financial condition of the borrower, the quality of the collateral and the management of the property securing the loan.

~~Auto and RV~~. Auto and RV loans primarily consist of direct and indirect auto loans and legacy RV loans. These auto and RV loans were originated across the U.S. The collateral for these auto and RV loans is comprised of a mix of new and used autos and RVs. Auto and RV loans generally have shorter terms to maturity than mortgage loans. Auto and RV loans generally involve a greater degree of risk than do residential mortgage loans, particularly in the case of auto and RV loans, which are secured by rapidly depreciating and mobile assets. In such cases, any repossessed collateral for a defaulted auto and RV loan may not provide an adequate source of repayment of the outstanding loan balance as a result of the greater likelihood of damage, loss or depreciation. The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the credit-worthiness of the borrower.

~~Factoring~~. Factoring loans are originated through the wholesale and retail purchase of state lottery prize and structured settlement annuities. These annuities are high credit quality deferred payment receivables having a state lottery commission or primarily highly rated insurance company payor. Purchases of state lottery prize or structured settlement annuities are governed by specific state statutes requiring judicial approval of each transaction. No transaction is funded before an order approving such transaction has been entered by a court of competent jurisdiction. The Company’s commission-based sales force originates contracts for the retail purchase of such payments from leads generated by the Company’s dedicated research department through the use of proprietary research techniques. The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the credit-worthiness of the state or insurer.

~~Commercial and industrial~~. Commercial and industrial loans and leases are primarily made based on the operating cash flows of the borrower or conversion of working capital assets to cash and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers may be volatile and the value of the collateral securing these loans and leases may be difficult to measure. Most commercial and industrial loans and leases are secured by the assets being financed or other business assets such as accounts receivable or inventory and generally include personal guarantees based on a review of personal financial statements. Although commercial and industrial loans and leases are often collateralized by equipment, inventory, accounts receivable or other business assets, the liquidation of collateral in the event of a borrower default may be an insufficient source of repayment, because accounts receivable may be uncollectible and inventories and equipment may be obsolete or of limited use. Accordingly, the repayment of a commercial and industrial loan or lease primarily depends on the credit-worthiness of the borrower and guarantors, while the liquidation of collateral is a secondary and potentially insufficient source of repayment. The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the management of the business and the credit-worthiness of borrowers and guarantors.

~~Other~~. The Company originates other loans, which include unsecured consumer loans and other small balance business and consumer loans. Other consumer loans generally have shorter terms to maturity than mortgage loans. Other consumer loans generally

involve a greater degree of risk than do residential mortgage loans, particularly in the case of consumer loans that are unsecured. In such cases, it is not possible to repossess collateral for a defaulted consumer loan and as such there may not exist an adequate source of repayment of the outstanding loan balance as a result of the absence of security. The Company attempts to mitigate these risks by adhering to its underwriting policies in evaluating the credit-worthiness of the borrower.

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

At June 30,
(Dollars in thousands) 2019 2018
Single family real estate secured:
Mortgage $ 4,278,822
$ 4,198,941
Home equity 2,258
2,306
Warehouse and other¹
820,559
412,085
Multifamily real estate secured 1,948,513
1,800,919
Commercial real estate secured 326,154
220,379
Auto and RV secured 290,894
213,522
Factoring 93,091
169,885
Commercial & Industrial 1,653,314
1,481,051
Other 35,705
18,598
Total gross loans and leases 9,449,310
8,517,686
Allowance for loan and lease losses (57,085 ) (49,151 )
Unaccreted discounts and loan and lease fees (10,101 ) (36,246 )
Total net loans and leases $ 9,382,124
$ 8,432,289

¹The balance of single family warehouse loans was $301,999 at June 30, 2019 and $175,508 at June 30, 2018. The remainder of the balance was attributable to commercial specialty and lender finance loans secured by single family real estate.


	At June 30,
(Dollars in thousands)	2022		2021

Single Family - Mortgage & Warehouse	$	3,988,462	$	4,359,472
Multifamily and Commercial Mortgage	2,877,680		2,470,454
Commercial Real Estate	4,781,044		3,180,453
Commercial & Industrial - Non-RE	2,028,128		1,123,869
Auto & Consumer	567,228		362,180
Other	11,134		58,316


Total gross loans	14,253,676		11,554,744
Allowance for credit losses - loans	(148,617)		(132,958)
Unaccreted premiums (discounts) and loan fees	(13,998)		(6,972)
Total net loans	$	14,091,061	$	11,414,814

The following table summarizes activity in the allowance for ~~loan and lease~~credit losses - loans for the periods indicated:

At June 30,
(Dollars in thousands) 2019 2018 2017
Balance—beginning of period $ 49,151
$ 40,832
$ 35,826
Provision for loan and lease loss 27,350
25,800
11,061
Charged off (19,663 ) (15,979 ) (5,096 )
Transfers to held for sale (2,356 ) (2,307 ) (1,828 )
Recoveries 2,603
805
869
Balance—end of period $ 57,085
$ 49,151
$ 40,832

Loans loans held for investment transfered to loans held for sale classification are carried at the lower of cost or fair value. At the time of transfer into the held for sale classification, any amount by which cost exceeds fair value is accounted for as a charge against the allowance for loan and lease losses, shown in the transfers to held for sale in the table above.

~~The following table summarizes the composition of the impaired loans and leases:~~

At June 30,
(Dollars in thousands) 2019 2018 2017
Nonaccrual loans and leases—90+ days past due plus other nonaccrual loans and leases $ 47,821
$ 30,197
$ 26,815
Troubled debt restructured loans and leases—non-accrual 623
1,029
1,578
Troubled debt restructured loans and leases—performing —
—
—
Total impaired loans and leases $ 48,444
$ 31,226
$ 28,393

At June 30, 2019, the carrying value of impaired loans and leases is net of write offs of $2,415. At June 30, 2019, $48,444 of impaired loans and leases had no specific allowance allocations. The average carrying value of impaired loans and leases was $39,468 and $30,420 for the fiscal years ended June 30, 2019 and 2018, respectively. The interest income recognized during the periods of impairment is insignificant for those loans and leases impaired at ~~June 30, 2019~~ or ~~2018. At~~ ~~June 30, 2019~~ ~~and~~ ~~2018~~, there were no loans or leases still accruing past due 90 days or more, unless the Company received principal and interest from the servicer despite the borrower’s delinquency. Cash receipts for loans and leases impaired is recorded against principal. The Company considers the servicer’s recovery of such advances in evaluating whether such loans should continue to accrue. A loan or lease is considered impaired when, based on current information and events, it is probable that we will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan or lease agreement. Factors that we consider in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans or leases that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan or lease’s effective interest rate or the fair value of the collateral if repayment of the loan or lease is expected from the sale of collateral.


	At June 30,
(Dollars in thousands)	2022		2021		2020
Balance—beginning of period	$	132,958	$	75,807	$	57,085
Effect of Adoption of ASC 326	—		47,300		—
Provision for loan and lease loss	18,500		23,750		42,200
Charged off	(4,428)		(16,558)		(25,833)

Recoveries	1,587		2,659		2,355
Balance—end of period	$	148,617	$	132,958	$	75,807

In the ordinary course of business, the Company has granted related party loans collateralized by real property to certain executive officers, directors and their affiliates. There were no refinances of related party loans in the fiscal year ended June 30, 2022. There was one ~~refinanced~~refinance of a related party loan in the amount of ~~$1,306~~$1.4 million during the fiscal year ended June 30, ~~2019. During~~2021. There were no new loans originated for related parties during the fiscal year ~~2018,~~ended June 30, 2022. There were four new loans originated for related parties in the ~~Company originated no new related party loans and did not execute any interest rate modifications~~amount of ~~existing loans.~~$10.0 million during the fiscal year ended June 30, 2021. Total principal payments on related party loans were ~~$461~~$3.0 million and ~~$341~~$7.0 million during the years ended June 30, ~~2019~~2022 and ~~2018,~~2021, respectively. At June 30, ~~2019~~2022 and ~~2018,~~2021, these loans amounted to ~~$13,342~~$25.6 million and ~~$8,956,~~$23.8 million, respectively, and are included in loans held for investment. Interest earned on these loans was ~~$326~~$0.1 million and ~~$81~~$0.1 million during the years ended June 30, ~~2019~~2022 and ~~2018,~~2021, respectively.

The Company’s loan ~~and lease~~ portfolio ~~consists~~consisted of approximately ~~11.7%~~9.4% fixed interest rate loans and ~~88.3%~~90.6% adjustable interest rate loans as of June 30, ~~2019.~~2022. The Company’s adjustable rate loans are ~~generally~~primarily based upon indices using ~~U.S. Treasury rates,~~ LIBOR, SOFR and ~~Eleventh District Cost~~Ameribor.

The Company’s loan portfolio consisted of ~~Funds.~~approximately 14.90% fixed interest rate loans and 85.10% adjustable interest rate loans as of June 30, 2021.

At June 30, ~~2019~~2022 and ~~2018, purchased~~2021, portfolio loans serviced by others were ~~$57,667~~$37.3 million, or ~~0.61%~~0.26%, and ~~$64,536~~$44.7 million, or ~~0.76%~~0.39%, respectively, of the loan portfolio.

~~Allowance for Loan and Lease Losses~~. The Company is committed to maintaining the allowance for loan and lease losses at a level that is considered to be commensurate with estimated probable incurred credit losses in the portfolio. Although the adequacy of the allowance is reviewed quarterly, management performs an ongoing assessment of the risks inherent in the portfolio. While the Company believes that the allowance for loan and lease losses is adequate at ~~June 30, 2019, future additions to the allowance will be subject to continuing evaluation of estimated and known, as well as inherent, risks in the loan and lease portfolio.~~

~~Allowance for Credit Loss Disclosures~~. The assessment of the adequacy of the Company’s allowance for loan and lease losses is based upon a number of quantitative and qualitative factors, including levels and trends of past due and nonaccrual loans, changes in the volume and mix of loans, collateral values and charge-off history. Based on historical performance, the Company divides the LTV analysis into two classes, separating purchased loans from the loans underwritten directly by the Company since mortgage loans originated by the Company experience lower estimated loss rates.

The Company provides general loan loss reserves for its auto and RV loans based upon the borrower’s credit score at the time of origination and the Company’s loss experience to date. The Company obtains updated credit scores for its auto and RV borrowers approximately every six months. The updated credit score will result in a higher or lower general loan loss allowance depending on the change in borrowers’ FICO scores and the resulting shift in loan balances among the five FICO bands from which the Company measures and calculates its reserves. For the general loss reserve, the Company does not use individually updated credit scores or valuations for the real estate collateralizing its real estate loans.

The Company provides general loan loss reserves for mortgage loans based upon the size and class of the mortgage loan and the LTV at date of origination. The allowance for each class is determined by dividing the outstanding unpaid balance for each loan by the LTV and applying a loss rate.

The Company originates and purchases mortgage loans with terms that may include repayments that are less than the repayments for fully amortizing loans, including interest only loans, option adjustable-rate mortgages, and other loan types that permit payments that may be smaller than interest accruals. The Companies lending guidelines for interest-only loans are adjusted for the increased credit risk associated with these loans by requiring borrowers with such loans to borrow at LTVs that are lower than standard amortizing ARM loans and by calculating debt to income ratios for qualifying borrowers based upon a fully amortizing payment, not the interest only payment. The Company’s Credit Committee monitors and performs reviews of interest only loans. Adverse trends reflected in the Company’s delinquency statistics, grading and classification of interest only loans would be reported to management

~~and the Board of Directors.~~ As of June 30, ~~2019,~~2022, the Company had ~~$1.3 billion~~$1,197.4 million of ~~interest only~~interest-only loans and ~~$1.6~~$7.0 million of option adjustable-rate mortgage loans. Through June 30, ~~2019,~~2022, the net amount of deferred interest on these loan types was not material to the

F-30

financial position or operating results of the Company. As of June 30, 2021, the Company had $1,074.3 million of interest-only loans and $0.9 million of option adjustable-rate mortgage loans. Through June 30, 2021, the net amount of deferred interest on these loan types was not material to the financial position or operating results of the Company.

The ~~Company’s commercial real estate secured portfolio consists of loans well collateralized by commercial real estate.~~

The Company’s commercial and industrial portfolio primarily consists of real estate-backed and asset-backed loans and leases to businesses and non-bank lenders. The Company’s other portfolios consist of receivables factoring for businesses and consumers and other small balance business and consumer loans. The Company allocates its allowance for loan and lease losses for these asset types based on qualitative factors which consider various attributes captured in the credit rating, the value of the collateral and the financial position of the issuer of the receivables.

~~The~~ following tables summarize activity in the allowance for ~~loan and lease~~credit losses - loans by portfolio classes for the periods indicated:


	June 30, 2022

(Dollars in thousands)	Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at July 1, 2021	$	26,604	$	13,146	$	57,928	$	28,460	$	6,519	$	301	$	132,958

Provision for credit losses - loans	(7,009)		1,332		11,411		2,544		10,492		(270)		18,500
Charge-offs	(82)		—		—		(322)		(4,024)		—		(4,428)

Recoveries	157		177		—		126		1,127		—		1,587
Balance at June 30, 2022	$	19,670	$	14,655	$	69,339	$	30,808	$	14,114	$	31	$	148,617

June 30, 2019
Single Family
(Dollars in thousands) Mortgage Home
Equity Warehouse & Other Multi-
family real estate secured Commercial
real estate secured Auto and RV secured Factoring Commercial & Industrial Other Total
Balance at July 1, 2018 $ 20,368
$ 14
$ 2,080
$ 5,010
$ 849
$ 3,178
$ 445
$ 16,238
$ 969
$ 49,151
Provision for loan and lease loss 1,317
(12 ) 4,247
(1,022 ) 195
2,605
(112 ) 2,286
17,846
27,350
Charge-offs (799 ) —
—
—
—
(1,156 ) —
(1,149 ) (16,559 ) (19,663 )
Transfers to held for sale —
—
—
—
—
—
—
—
(2,356 ) (2,356 )
Recoveries 396
11
—
109
—
191
—
—
1,896
2,603
Balance at June 30, 2019 $ 21,282
$ 13
$ 6,327
$ 4,097
$ 1,044
$ 4,818
$ 333
$ 17,375
$ 1,796
$ 57,085


	June 30, 2021

(Dollars in thousands)	Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at July 1, 2020	$	25,899	$	4,719	$	21,052	$	9,954	$	9,462	$	4,721	$	75,807
Effect of Adoption of ASC 326	6,318		7,408		25,893		7,042		610		29		47,300
Provision for credit losses - loans	(3,242)		1,196		11,238		14,251		(1,354)		1,661		23,750
Charge-offs	(2,502)		(177)		(255)		(2,833)		(3,517)		(7,274)		(16,558)

Recoveries	131		—		—		46		1,318		1,164		2,659
Balance at June 30, 2021	$	26,604	$	13,146	$	57,928	$	28,460	$	6,519	$	301	$	132,958

June 30, 2018
Single Family
(Dollars in thousands) Mortgage Home
Equity Warehouse & Other Multi-
family real estate secured Commercial
real estate secured Auto and RV secured Factoring Commercial & Industrial Other Total
Balance at July 1, 2017 $ 19,972
$ 19
$ 2,298
$ 4,638
$ 1,008
$ 2,379
$ 401
$ 9,881
$ 236
$ 40,832
Provision for loan and lease loss 632
(18 ) 69
372
(159 ) 1,390
44
6,357
17,113
25,800
Charge-offs (271 ) (1 ) (287 ) —
—
(803 ) —
—
(14,617 ) (15,979 )
Transfers to held for sale —
—
—
—
—
—
—
—
(2,307 ) (2,307 )
Recoveries 35
14
—
—
—
212
—
—
544
805
Balance at June 30, 2018 $ 20,368
$ 14
$ 2,080
$ 5,010
$ 849
$ 3,178
$ 445
$ 16,238
$ 969
$ 49,151

June 30, 2017
Single Family
(Dollars in thousands) Mortgage Home
Equity Warehouse & Other Multi-
family real estate secured Commercial
real estate secured Auto and RV secured Factoring Commercial & Industrial Consumer & Other Total
Balance at July 1, 2016 $ 18,666
$ 23
$ 2,685
$ 3,938
$ 882
$ 1,615
$ 245
$ 7,630
$ 142
$ 35,826
Provision for loan and lease loss 2,308
(6 ) (387 ) 323
110
990
156
2,251
5,316
11,061
Charge-offs (1,115 ) (23 ) —
—
(23 ) (433 ) —
—
(3,502 ) (5,096 )
Transfers to held for sale —
—
—
—
—
—
—
—
(1,828 ) (1,828 )
Recoveries 113
25
—
377
39
207
—
—
108
869
Balance at June 30, 2017 $ 19,972
$ 19
$ 2,298
$ 4,638
$ 1,008
$ 2,379
$ 401
$ 9,881
$ 236
$ 40,832

~~The following tables present our loans and leases evaluated individually for impairment by portfolio class for the periods indicated:~~

June 30, 2019
(Dollars in thousands) Unpaid
Principal
Balance
Principal Balance Adjustment¹
Recorded
Investment Accrued Interest/Origination Fees Total Related
Allocation of
General Allowance Related
Allocation of
Specific Allowance
With no related allowance recorded:
Single family real estate secured: ��
Mortgage
In-house originated $ 4,874
$ 1,775
$ 3,099
$ 255
$ 3,354
$ —
$ —
Purchased 2,237
1,142
1,095
—
1,095
—
—
Auto and RV secured
In-house originated 326
221
105
4
109
—
—
With an allowance recorded:
Single family real estate secured:
Mortgage
In-house originated 40,758
348
40,410
731
41,141
393
—
Purchased 1,418
17
1,401
109
1,510
12
—
Multifamily real estate secured
In-house originated 2,108
—
2,108
9
2,117
3
—
Auto and RV secured
In-house originated 10
—
10
—
10
1
—
Other 216
—
216
—
216
13
—
Total $ 51,947
$ 3,503
$ 48,444
$ 1,108
$ 49,552
$ 422
$ —
As a % of total gross loans and leases 0.55 % 0.04 % 0.51 % 0.01 % 0.52 % — % — %

June 30, 2018
(Dollars in thousands) Unpaid
Principal
Balance
Principal Balance Adjustment¹
Recorded
Investment Accrued Interest/Origination Fees Total Related
Allocation of
General Allowance Related
Allocation of
Specific Allowance
With no related allowance recorded:
Single family real estate secured:
Mortgage
In-house originated $ 1,584
$ 951
$ 633
$ 78
$ 711
$ —
$ —
Purchased 3,598
1,739
1,859
—
1,859
—
—
Multifamily real estate secured
Purchased 480
248
232
—
232
—
—
Auto and RV secured
In-house originated 369
309
60
2
62
—
—
With an allowance recorded:
Single family real estate secured:
Mortgage
In-house originated 24,607
47
24,560
—
24,560
247
—
Purchased 1,394
—
1,394
21
1,415
14
—
Home equity
In-house originated 16
—
16
—
16
1
—
Commercial & Industrial 172
—
172
—
172
9
—
Other 111
—
111
—
111
7
—
Total $ 32,331
$ 3,294
$ 29,037
$ 101
$ 29,138
$ 278
$ —
As a % of total gross loans and leases 0.38 % 0.04 % 0.34 % — % 0.34 % — % — %

¹Impaired loans with an allowance recorded do not have any charge-offs. Principal balance adjustments on impaired loans with an allowance recorded represent interest payments that have been applied to the book balance as a result of the loans’ non-accrual status.

~~The following tables present the balance in the allowance for loan and lease losses and the recorded investment in loans and leases by portfolio segment and based on impairment evaluation method:~~

June 30, 2019
Single Family
(Dollars in thousands) Mortgage Home
Equity Warehouse & Other Multi-
family real estate secured Commercial
real estate secured Auto and RV secured Factoring Commercial & Industrial Other Total
Allowance for loan and lease losses:
Ending allowance balance attributable to loans and leases:
Individually evaluated for impairment–
general allowance
$ 405
$ —
$ —
$ 3
$ —
$ 1
$ —
$ —
$ 13
$ 422
Individually evaluated for impairment–
specific allowance
—
—
—
—
—
—
—
—
—
—
Collectively evaluated for impairment 20,877
13
6,327
4,094
1,044
4,817
333
17,375
1,783
56,663
Total ending allowance balance $ 21,282
$ 13
$ 6,327
$ 4,097
$ 1,044
$ 4,818
$ 333
$ 17,375
$ 1,796
$ 57,085
Loans and leases:
Loans and leases individually evaluated for impairment ¹
$ 46,005
$ —
$ —
$ 2,108
$ —
$ 115
$ —
$ —
$ 216
$ 48,444
Loans and leases collectively evaluated for impairment 4,232,817
2,258
820,559
1,946,405
326,154
290,779
93,091
1,653,314
35,489
9,400,866
Principal loan and lease balance 4,278,822
2,258
820,559
1,948,513
326,154
290,894
93,091
1,653,314
35,705
9,449,310
Unaccreted discounts and loan and lease fees 8,724
66
(1,773 ) 5,090
649
2,631
(21,627 ) (3,169 ) (692 ) (10,101 )
Total recorded investment in loans and leases $ 4,287,546
$ 2,324
$ 818,786
$ 1,953,603
$ 326,803
$ 293,525
$ 71,464
$ 1,650,145
$ 35,013
$ 9,439,209

¹~~Loans and leases evaluated for impairment include TDRs that have been performing for more than~~ ~~six~~ ~~months.~~

June 30, 2018
Single Family
(Dollars in thousands) Mortgage Home
Equity Warehouse & Other Multi-
family real estate secured Commercial
real estate secured Auto and RV secured Factoring Commercial & Industrial Other Total
Allowance for loan and lease losses:
Ending allowance balance attributable to loans and leases:
Individually evaluated for impairment –
general allowance

$ 261
$ 1
$ —
$ —
$ —
$ —
$ —
$ 9
$ 7
$ 278
Individually evaluated for impairment –
specific allowance

$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
Collectively evaluated for impairment 20,107
13
2,080
5,010
849
3,178
445
16,229
962
48,873
Total ending allowance balance $ 20,368
$ 14
$ 2,080
$ 5,010
$ 849
$ 3,178
$ 445
$ 16,238
$ 969
$ 49,151
Loans and leases:
Loans and leases individually evaluated for impairment ¹
$ 28,446
$ 16
$ —
$ 232
$ —
$ 60
$ —
$ 172
$ 111
$ 29,037
Loans and leases collectively evaluated for impairment 4,170,495
2,290
412,085
1,800,687
220,379
213,462
169,885
1,480,879
18,487
8,488,649
Principal loan and lease balance 4,198,941
2,306
412,085
1,800,919
220,379
213,522
169,885
1,481,051
18,598
8,517,686
Unaccreted discounts and loan and lease fees 9,187
48
(706 ) 5,063
836
2,065
(48,039 ) (3,884 ) (816 ) (36,246 )
Total recorded investment in loans and leases $ 4,208,128
$ 2,354
$ 411,379
$ 1,805,982
$ 221,215
$ 215,587
$ 121,846
$ 1,477,167
$ 17,782
$ 8,481,440

¹~~Loans and leases evaluated for impairment include TDRs that have been performing for more than~~ ~~six~~ ~~months.~~


	June 30, 2020

(Dollars in thousands)	Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at July 1, 2019	$	22,290	$	3,807	$	14,632	$	9,544	$	6,339	$	473	$	57,085
Provision for credit losses - loans	3,546		793		6,420		4,542		7,429		19,470		42,200
Charge-offs	(203)		—		—		(4,132)		(5,047)		(16,451)		(25,833)

Recoveries	266		119		—		—		741		1,229		2,355
Balance at June 30, 2020	$	25,899	$	4,719	$	21,052	$	9,954	$	9,462	$	4,721	$	75,807

Credit Quality Disclosure. Nonaccrual loans ~~and leases~~ consisted of the following as of the dates indicated:


	As of June 30, 2022
(Dollars in thousands)	With Allowance		With No Allowance		Total
Single Family - Mortgage & Warehouse	$	66,424	$	—	$	66,424
Multifamily and Commercial Mortgage	33,410		—		33,410
Commercial Real Estate	14,852		—		14,852
Commercial & Industrial - Non-RE	2,989		—		2,989
Auto & Consumer	439		—		439
Other	80		—		80
Total nonaccrual loans	$	118,194	$	—	$	118,194
Nonaccrual loans to total loans					0.83		%

At June 30,
(Dollars in thousands) 2019 2018
Nonaccrual loans and leases:
Single Family Real Estate Secured:
Mortgage
In-house originated $ 43,509
$ 25,193
Purchased 2,496
3,253
Home Equity
In-house originated —
16
Multifamily Real Estate Secured
In-house originated 2,108
—
Purchased —
232
Total nonaccrual loans secured by real estate 48,113
28,694
Auto and RV Secured 115
60
Commercial and Industrial —
2,361
Other 216
111
Total nonaccrual loans and leases $ 48,444
$ 31,226
Nonaccrual loans and leases to total loans and leases 0.51 % 0.37 %


	As of June 30, 2021
(Dollars in thousands)	With Allowance		With No Allowance		Total
Single Family - Mortgage & Warehouse	$	45,951	$	59,757	$	105,708
Multifamily and Commercial Mortgage	2,916		17,512		20,428
Commercial Real Estate	15,839		—		15,839
Commercial & Industrial - Non-RE	2,942		—		2,942
Auto & Consumer	230		48		278

Total nonaccrual loans	$	67,878	$	77,317	$	145,195
Nonaccrual loans to total loans					1.26		%

F-31

Approximately ~~1.29%~~1.18% of our nonaccrual loans ~~and leases~~ at June 30, ~~2019~~2022 were considered TDRs, compared to ~~3.30%~~0.55% at June 30, ~~2018.~~2021. Borrowers who make timely payments after TDRs are considered non-performing for at least six months. Generally, after six months of timely payments, those TDRs are reclassified from the nonaccrual loan ~~and lease~~ category to performing and return to accrual status. Approximately ~~94.97%~~56.20% of the Bank’s nonaccrual loans ~~and leases~~ are single family first ~~mortgages already written down to 44.94% in aggregate, of the original appraisal value of the underlying properties.~~mortgages.

The following tables provide the outstanding unpaid balance of loans ~~and leases~~ that are performing and nonaccrual by portfolio class as of the dates indicated:


	June 30, 2022
(Dollars in thousands)	Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	$	3,922,038	$	2,844,270	$	4,766,192	$	2,025,139	$	566,789	$	11,054	$	14,135,482
Nonaccrual	66,424		33,410		14,852		2,989		439		80		118,194
Total	$	3,988,462	$	2,877,680	$	4,781,044	$	2,028,128	$	567,228	$	11,134	$	14,253,676


	June 30, 2019
	Single Family																					June 30, 2021
(Dollars in thousands)	Mortgage		Home Equity		Warehouse & Other		Multi- family real estate secured		Commercial real estate secured		Auto and RV secured		Factoring		Commercial & Industrial		Other		Total		(Dollars in thousands)	Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	$	4,232,817	$	2,258	$	820,559	$	1,946,405	$	326,154	$	290,779	$	93,091	$	1,653,314	$	35,489	$	9,400,866	Performing	$	4,253,764	$	2,450,026	$	3,164,614	$	1,120,927	$	361,902	$	58,316	$	11,409,549
Nonaccrual	46,005		—		—		2,108		—		115		—		—		216		48,444		Nonaccrual	105,708		20,428		15,839		2,942		278		—		145,195
Total	$	4,278,822	$	2,258	$	820,559	$	1,948,513	$	326,154	$	290,894	$	93,091	$	1,653,314	$	35,705	$	9,449,310	Total	$	4,359,472	$	2,470,454	$	3,180,453	$	1,123,869	$	362,180	$	58,316	$	11,554,744



Delaware						33-0867444
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)



Securities registered pursuant to Section 12(b) of the Act:
Title of each class			Trading Symbol(s)	Name of each exchange on which registered
Common stock, $.01 par value			AX	New York Stock Exchange
~~6.25% Subordinated Notes Due 2026~~	~~AXO~~	~~New York Stock Exchange~~



Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


PART I		1
Item 1. Business		1
Item 1A. Risk Factors		24
Item 1B. Unresolved Staff Comments		38
Item 2. Properties		38
Item 3. Legal Proceedings		38
Item 4. Mine Safety Disclosures		38

PART III		139
~~Item 1. Business~~		1
~~Item 1A. Risk Factors~~	22
~~Item 1B. Unresolved Staff Comments~~	33
~~Item 2. Properties~~	33
~~Item 3. Legal Proceedings~~	33
~~Item 4. Mine Safety Disclosures~~	34

~~PART II~~	35
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3539
Item 6. ~~Selected Financial Data~~[Reserv ed ]		3741
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		3942
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		6772
Item 8. Financial Statements and Supplemental Data		6772
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		6772
Item 9A. Controls and Procedures		6772
Item 9B. Other Information		7176

~~PART III~~	72
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		76

PART III		76
Item 10. Directors, Executive Officers and Corporate Governance		7276
Item 11. Executive Compensation		7276
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		7276
Item 13. Certain Relationships and Related Transactions, and Director Independence		7276
Item 14. Principal ~~Accounting~~Accountant Fees and Services		7276

PART IV		7377
Item 15. Exhibits and Financial Statement Schedules		7377
~~Signatures~~Item 16. Form 10-K Summary		7680
Signatures		80


	At June 30, 2019																					At June 30, 2022
	Total Amount				Due Within One Year				Due After One but within Five Years				Due After Five but within Ten Years				Due After Ten Years					Total Amount				Due Within One Year				Due After One but within Five Years				Due After Five but within Ten Years				Due After Ten Years
(Dollars in thousands)	Amount		Yield¹		Amount		Yield¹		Amount		Yield¹		Amount		Yield¹		Amount		Yield¹		(Dollars in thousands)	Amount		Yield1		Amount		Yield1		Amount		Yield1		Amount		Yield1		Amount		Yield1
Available-for-sale																					Available-for-sale
Mortgage-backed securities:																					Mortgage-backed securities:
U.S. Agency²	$	9,486	2.47	%	$	862	2.65	%	$	2,905	2.65	%	$	2,674	2.57	%	$	3,045	2.16	%
Agency2																					Agency2	$	27,722	1.40	%	$	4,794	1.65	%	$	13,035	1.55	%	$	7,149	1.38	%	$	2,744	0.35	%
Non-Agency³	13,489		5.00	%	1,877		4.89	%	5,938		4.60	%	3,824		4.71	%	1,850		7.01	%	Non-Agency3	187,616		5.61	%	27,386		8.08	%	158,382		5.13	%	1,402		10.56	%	446		7.17	%
Total Mortgage-Backed Securities	$	22,975	3.96	%	$	2,739	4.18	%	$	8,843	3.96	%	$	6,498	3.83	%	$	4,895	3.99	%	Total Mortgage-Backed Securities	$	215,338	5.07	%	$	32,180	7.12	%	$	171,417	4.86	%	$	8,551	2.89	%	$	3,190	1.30	%
Non-RMBS																					Non-RMBS
U.S. agencies	$	1,682	2.44	%	$	1,682	2.44	%	$	—	—	%	$	—	—	%	$	—	—	%

Municipal	$	21,974	3.01	%	$	3,952	2.27	%	$	5,150	1.28	%	$	8,266	4.05	%	$	4,606	3.70	%	Municipal	3,529		3.57	%	—		—	%	—		—	%	—		—	%	3,529		3.57	%
Asset-backed securities and structured notes	179,976		6.00	%	16,918		7.43	%	163,058		5.85	%	—		—	%	—		—	%	Asset-backed securities and structured notes	47,000		8.24	%	12,260		8.24	%	34,740		8.24	%	—		—	%	—		—	%
Total Non-RMBS	$	203,632	5.65	%	$	22,552	6.15	%	$	168,208	5.71	%	$	8,266	4.05	%	$	4,606	3.70	%	Total Non-RMBS	$	50,529	7.91	%	$	12,260	8.24	%	$	34,740	8.24	%	$	—	—	%	$	3,529	3.57	%
Available-for-sale—Amortized Cost	$	226,607	5.48	%	$	25,291	5.94	%	$	177,051	5.63	%	$	14,764	3.95	%	$	9,501	3.85	%	Available-for-sale—Amortized Cost	$	265,867	5.61	%	$	44,440	7.43	%	$	206,157	5.43	%	$	8,551	2.89	%	$	6,719	2.49	%
Available-for-sale—Fair Value	$	227,513	5.48	%	$	25,960	5.94	%	$	178,194	5.63	%	$	13,980	3.95	%	$	9,379	3.85	%	Available-for-sale—Fair Value	$	262,518	5.62	%	$	44,713	7.43	%	$	203,674	5.43	%	$	7,987	2.89	%	$	6,144	2.49	%
Total securities	$	227,513	5.48	%	$	25,960	5.94	%	$	178,194	5.63	%	$	13,980	3.95	%	$	9,379	3.85	%

Total available-for-sale securities																					Total available-for-sale securities	$	262,518	5.62	%	$	44,713	7.43	%	$	203,674	5.43	%	$	7,987	2.89	%	$	6,144	2.49	%



☒			ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐			TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



(Dollars in thousands)	Fixed		Floating or Adjustable¹		Total
Single family real estate secured:
Mortgage	$	72,858	$	4,173,792	$	4,246,650
Home equity	613		1,645		2,258
Warehouse and other	13,211		177,083		190,294
Multifamily real estate secured	52,880		1,851,655		1,904,535
Commercial real estate secured	14,934		300,620		315,554
Auto and RV secured	290,731		—		290,731
Factoring	82,993		—		82,993
Commercial & Industrial	329,933		779,398		1,109,331
Other	32,948		—		32,948
Total	$	891,101	$	7,284,193	$	8,175,294



	Available-for-Sale		Held-to-maturity		Trading
(Dollars in thousands)	Fair Value		Carrying Amount		Fair Value		Total
Fiscal year end
June 30, 2019	$	227,513	$	—	$	—	$	227,513
June 30, 2018	180,305		—		—		180,305
June 30, 2017	264,470		—		8,327		272,797
June 30, 2016	265,447		199,174		7,584		472,205
June 30, 2015	163,361		225,555		7,832		396,748


(Dollars in thousands)	BOLI Values
Balance as of June 30, 2019	$	6,969
Death benefits	(763)
Change in Contract Value	174
Balance as of June 30, 2020	6,380
Additions	50,000
Change in Contract Value	175
Balance as of June 30, 2021	56,555
Additions	100,000
Change in Contract Value	4,220
Balance as of June 30, 2022	$	160,775


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•	~~A bankruptcy and non-bankruptcy trustee and fiduciary service business who introduce their clients to our deposit products~~. banking needs.


◦	•Purchase Rewards. Customers can earn cash back by using their VISA® Debit Card at select merchants; ~~Customers can earn cash back by using their VISA~~^® ~~Debit Card at select merchants.~~


◦	~~Mobile Banking.~~ ~~Customers can access with Touch ID on eligible devices, review account balances, transfer funds, deposit checks and pay bills from the convenience of their mobile phone.~~


◦	~~Mobile Deposit.~~ ~~Customers can instantly deposit checks from their smart phones using our Mobile App.~~


◦	~~Peer to Peer payments.~~ ~~Customers can securely send money via email or text messaging through this service.~~



	At June 30,
	2019	2018	2017	2016	2015
Non-interest-bearing, prepaid and other	3,743,334	3,535,904	3,113,128	1,816,266	553,245
Checking and savings accounts	311,067	270,082	274,962	292,012	31,461
Time deposits	23,447	2,309	2,748	4,807	5,515
Total number of deposit accounts	4,077,848	3,808,295	3,390,838	2,113,085	590,221


	At June 30,																					At June 30,
	2019				2018				2017				2016				2015					2022				2021				2020
(Dollars in thousands)	Amount		Rate¹		Amount		Rate¹		Amount		Rate¹		Amount		Rate¹		Amount		Rate¹		(Dollars in thousands)	Amount		Rate1		Amount		Rate1		Amount		Rate1
Non-interest-bearing	$	1,441,930	—		$	1,015,355	—		$	848,544	—		$	588,774	—		$	309,339	—		Non-interest-bearing	$	5,033,970	—		$	2,474,424	—		$	1,936,661	—
Interest-bearing:																					Interest-bearing:
Demand	2,709,014		2.06	%	2,519,845		1.60	%	2,593,491		0.89	%	1,916,525		0.63	%	1,224,308		0.48	%	Demand	3,611,889		0.61	%	3,369,845		0.15	%	3,456,127		0.37	%
Savings	2,466,214		1.48	%	2,482,430		1.31	%	2,651,176		0.81	%	2,484,994		0.69	%	2,126,792		0.67	%	Savings	4,245,555		0.95	%	3,458,687		0.21	%	3,697,188		0.78	%
Total demand and savings	5,175,228		1.78	%	5,002,275		1.46	%	5,244,667		0.85	%	4,401,519		0.66	%	3,351,100		0.60	%	Total demand and savings	7,857,444		0.79	%	$	6,828,532	0.18	%	$	7,153,315	0.58	%
Time deposits	2,366,015		2.43	%	1,967,720		2.32	%	806,296		2.46	%	1,053,758		1.96	%	791,478		1.99	%	Time deposits	1,055,008		1.25	%	1,512,841		1.22	%	2,246,718		1.91	%
Total interest-bearing	7,541,243		1.99	%	6,969,995		1.70	%	6,050,963		1.06	%	5,455,277		0.91	%	4,142,578		0.87	%
Total interest-bearing2																					Total interest-bearing2	$	8,912,452	0.85	%	$	8,341,373	0.37	%	$	9,400,033	0.90	%
Total deposits	$	8,983,173	1.67	%	$	7,985,350	1.48	%	$	6,899,507	0.93	%	$	6,044,051	0.82	%	$	4,451,917	0.81	%	Total deposits	$	13,946,422	0.54	%	$	10,815,797	0.29	%	$	11,336,694	0.75	%


◦	~~Online Bill Payment Service.~~ ~~Customers can automatically pay their bills online from their account.~~


◦	~~My Deposit.~~ ~~Customers can scan checks with this remote deposit solution from their home computers. Scanned images will be electronically transmitted for deposit directly to their account.~~


◦	~~Text Message Banking.~~ ~~Customers can view their account balances, transaction history, and transfer funds between their accounts via these text message commands from their mobile phones.~~


◦	~~Unlimited ATM reimbursements.~~ ~~With certain checking accounts, Customers are reimbursed for any fees incurred using an ATM (excludes international ATM transactions). This gives them access to any ATM in the nation, for free.~~


◦	~~Secure Email.~~ ~~Customers can send and receive secure emails from our customer service department without concern for the security of their information.~~


◦	~~InterBank Transfer.~~ ~~Customers can transfer money to their accounts at other financial institutions from their online banking platform.~~


◦	~~VISA~~^® ~~Debit Cards or ATM Cards.~~ ~~Customers may choose to receive either a free VISA~~^® ~~Debit or an ATM card upon account opening. Customers can access their accounts worldwide at ATMs and any other locations that accept VISA~~^® ~~Debit cards.~~


◦	~~Overdraft Protection.~~ ~~Eligible Customers can enroll in one of our overdraft protection programs.~~


◦	~~Digital Wallets.~~ ~~Our Apple Pay™, Samsung Pay™ and Android Pay™ solutions provide the same ease to pay as a debit card with an eligible device. The mobile experience is easy and seamless.~~


(Dollars in thousands)	June 30, 2022
3 months or less	$	5,840
3 months to 6 months	2,821
6 months to 12 months	7,057
Over 12 months	13,838
Total	$	29,556



	Term to Maturity
(Dollars in thousands)	Within Three Months		Over Three Months to Six Months		Over Six Months to One Year		Over One Year		Total
Fiscal year end
June 30, 2019	$	151,176	$	363,486	$	376,714	$	335,201	$	1,226,577
June 30, 2018	96,837		75,464		33,125		41,569		246,995
June 30, 2017	71,771		21,137		71,266		606,892		771,066
June 30, 2016	100,048		133,603		228,532		539,726		1,001,909
June 30, 2015	37,842		189,604		106,826		386,837		721,109


Period	Number of Shares Purchased	Average Price Paid Per Shares		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
Stock Repurchases1(dollars in thousands)
Quarter Ended June 30, 2022
April 1, 2022 to April 30, 2022	—	$	—	—	$	—
May 1, 2022 to May 31, 2022	—	—		—	—
June 1, 2022 to June 30, 2022	—	—		—	—
For the Three Months Ended June 30, 2022	—	$	—	—	$	52,764
Stock Retained in Net Settlement2
April 1, 2022 to April 30, 2022	381
May 1, 2022 to May 31, 2022	522
June 1, 2022 to June 30, 2022	126,255
For the Three Months Ended June 30, 2022	127,158


	Cumulative Return as of June 30,
	2017		2018		2019		2020		2021		2022
Axos	$	100.00	$	172.47	$	114.88	$	93.09	$	195.57	$	151.14
NYSE	100.00		108.94		116.64		109.06		155.13		138.86
XABQ	100.00		111.02		100.28		76.29		121.62		114.23



	For Twelve Months Ended June 30,
(Dollars in thousands, except per share amounts)	2019			2018
Net income	$	155,131		$	152,411
Acquisition-related costs	6,714			1,470
Excess FDIC expense	1,111			—
Other costs	15,299			—
Income taxes	(6,267		)	(535		)
Adjusted earnings (Non-GAAP)	$	171,988		$	153,346
Adjusted EPS (Non-GAAP)	$	2.75		$	2.39


	Fiscal Year Ended June 30, 2019 vs 2018										Fiscal Year Ended June 30, 2022 vs 2021
	Increase (Decrease) Due to										Increase (Decrease) Due to
(Dollars in thousands)	Volume			Rate			Total Increase (Decrease)			(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)
Increase (decrease) in interest income:										Increase (decrease) in interest income:
Loans and leases	$	62,915		$	15,411		$	78,326
Federal funds sold				—
Loans										Loans	$	63,006	$	(20,788)	$	42,218

Interest-earning deposits in other financial institutions	(3,102		)	4,147			1,045			Interest-earning deposits in other financial institutions	(602)		2,918		2,316
Investment securities	41			2,567			2,608			Investment securities	(724)		(1,884)		(2,608)
Securities borrowed and margin lending	8,746			—			8,746			Securities borrowed and margin lending	2,314		(2,268)		46
Stock of the regulatory agencies	(1,574		)	662			(912		)	Stock of the regulatory agencies	72		(179)		(107)
Total increase (decrease) in interest income	$	67,026		$	22,787		$	89,813		Total increase (decrease) in interest income	$	64,066	$	(22,201)	$	41,865
Increase (decrease) in interest expense:										Increase (decrease) in interest expense:
Interest-bearing demand and savings	$	(10,207	)	$	17,585		$	7,378		Interest-bearing demand and savings	$	(1,735)	$	(7,243)	$	(8,978)
Time deposits	32,090			(2,239		)	29,851			Time deposits	(8,570)		(9,361)		(17,931)
Securities sold under agreements to repurchase	(229		)	—			(229		)

Securities loaned	748			—			748			Securities loaned	2,301		(2,348)		(47)
Advances from the FHLB	1,889			8,097			9,986			Advances from the FHLB	180		(552)		(372)
Other borrowings	2,797			(829		)	1,968			Other borrowings	(1,486)		2,263		777
Total increase (decrease) in interest expense	$	27,088		$	22,614		$	49,702		Total increase (decrease) in interest expense	$	(9,310)	$	(17,241)	$	(26,551)



	Fiscal Year Ended June 30, 2019
(Dollars in thousands)	Banking Business		Securities Business			Corporate/Eliminations			Axos Consolidated
Net interest income	$	404,500	$	7,564		$	(3,459	)	$	408,605
Provision for loan losses	27,350		—			—			27,350
Non-interest income	70,917		12,071			(231		)	82,757
Non-interest expense	192,588		34,430			24,188			251,206
Income before taxes	$	255,479	$	(14,795	)	$	(27,878	)	$	212,806



	Fiscal Year Ended June 30, 2018
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations			Axos Consolidated
Net interest income	$	371,661	$	—	$	(3,167	)	$	368,494
Provision for loan losses	25,800		—		—			25,800
Non-interest income	70,788		—		153			70,941
Non-interest expense	152,877		—		21,059			173,936
Income before taxes	$	263,772	$	—	$	(24,073	)	$	239,699


²	~~Loans and leases include loans held for sale, loan premiums and unearned fees.~~


³	Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loans and leases include average balances of $28.7 million and $29.3 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2019 and 2018 twelve-month periods, respectively.


⁴	~~Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.~~