UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March~~December 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-37709

AXOS FINANCIAL, INC.

(Exact name of registrant as specified in its charter)


Delaware						33-0867444
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

9205 West Russell Road, Suite 400, Las Vegas, NV 89148

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code: (858) 649-2218


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, $0.01 par value	AX	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

The number of shares outstanding of the registrant’s common stock on the last practicable date: ~~59,663,388~~60,000,709 shares of common stock, $0.01 par value per share, as of ~~April 21, 2022.~~January 20, 2023.

Table of Contents

AXOS FINANCIAL, INC.

INDEX


			Page
PART I – FINANCIAL INFORMATION			1

ITEM 1. FINANCIAL STATEMENTS			1
Condensed Consolidated Balance Sheets ~~(unaudited)~~ as of ~~March 31,~~Dec ember 3 1 , 2022 (unaudited) and June 30, ~~2021~~2022			1
Condensed Consolidated Statements of Income (unaudited) for the three ~~and~~ ~~nine~~and six months ended ~~March~~Dec ~~31, 202~~2 ~~and 202~~ember 3 1 , 2022 and 2021			2
Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three ~~and~~ ~~nine~~and six months ended ~~March 31, 20~~Dec 22 ~~and 202~~ember 3 1 , 2022 and 2021			3
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) for the three ~~and~~ ~~nine~~and six months ended ~~March 31,~~ Dec ~~202~~ember 3 21 , 2022 and ~~202~~12021			4
Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~six months ended ~~March~~December 31, ~~202~~2 2022 and ~~202~~12021			6
Notes to Condensed Consolidated Financial Statements			87

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			29
SELECTED FINANCIAL DATA			3332
RESULTS OF OPERATIONS			3534
FINANCIAL CONDITION			4745
LIQUIDITY			5149
OFF-BALANCE SHEET COMMITMENTS			5249
CAPITAL RESOURCES AND REQUIREMENTS			5250
~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~			54

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISKS~~RISK			5652

ITEM 4. CONTROLS AND PROCEDURES			5654

PART II – OTHER INFORMATION			5755

ITEM 1. LEGAL PROCEEDINGS			5755

ITEM 1A. RISK FACTORS			5755

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			5756

ITEM 3. DEFAULTS UPON SENIOR SECURITIES			5756

ITEM 4. MINE SAFETY DISCLOSURES			5756

ITEM 5. OTHER INFORMATION			5756

ITEM 6. EXHIBITS			5857

SIGNATURES			5958

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~(Unaudited)~~


(Dollars in thousands, except par and stated value)	(Dollars in thousands, except par and stated value)	March 31, 2022		June 30, 2021		(Dollars in thousands, except par and stated value)	(Unaudited) December 31, 2022		June 30, 2022
ASSETS	ASSETS					ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	998,348	$	715,624	Cash and cash equivalents	$	1,755,603	$	1,202,587
Cash segregated for regulatory purposes	Cash segregated for regulatory purposes	250,966		322,153		Cash segregated for regulatory purposes	196,910		372,112

Total cash, cash equivalents, and cash segregated	Total cash, cash equivalents, and cash segregated	1,249,314		1,037,777		Total cash, cash equivalents, and cash segregated	1,952,513		1,574,699
Securities:	Securities:					Securities:
Trading	Trading	366		1,983		Trading	372		1,758
Available-for-sale	Available-for-sale	229,510		187,335		Available-for-sale	248,062		262,518

Stock of regulatory agencies	Stock of regulatory agencies	20,368		19,995		Stock of regulatory agencies	20,881		20,368
Loans held for sale, carried at fair value	Loans held for sale, carried at fair value	19,611		29,768		Loans held for sale, carried at fair value	4,292		4,973
Loans held for sale, lower of cost or fair value	Loans held for sale, lower of cost or fair value	11,182		12,294		Loans held for sale, lower of cost or fair value	455		10,938
Loans—net of allowance for credit losses of $143.4 million as of March 31, 2022 and $133.0 million as of June 30, 2021		13,093,603		11,414,814
Loans—net of allowance for credit losses of $157,218 as of December 31, 2022 and $148,617 as of June 30, 2022						Loans—net of allowance for credit losses of $157,218 as of December 31, 2022 and $148,617 as of June 30, 2022	15,473,212		14,091,061

Mortgage servicing rights, carried at fair value	Mortgage servicing rights, carried at fair value	23,519		17,911		Mortgage servicing rights, carried at fair value	25,526		25,213
Other real estate owned and repossessed vehicles		564		6,782

Goodwill and other intangible assets—net		159,150		115,972

Securities borrowed	Securities borrowed	274,644		619,088		Securities borrowed	58,846		338,980
Customer, broker-dealer and clearing receivables	Customer, broker-dealer and clearing receivables	510,561		369,815		Customer, broker-dealer and clearing receivables	272,579		417,417
Goodwill and other intangible assets—net						Goodwill and other intangible assets—net	157,585		156,405
Other assets	Other assets	488,558		432,031		Other assets	526,712		496,835
TOTAL ASSETS	TOTAL ASSETS	$	16,080,950	$	14,265,565	TOTAL ASSETS	$	18,741,035	$	17,401,165

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY					LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:	Deposits:					Deposits:
Non-interest bearing	Non-interest bearing	$	4,135,278	$	2,474,424	Non-interest bearing	3,442,148		5,033,970
Interest bearing	Interest bearing	8,597,724		8,341,373		Interest bearing	12,248,346		8,912,452
Total deposits	Total deposits	12,733,002		10,815,797		Total deposits	15,690,494		13,946,422

Advances from the Federal Home Loan Bank	Advances from the Federal Home Loan Bank	152,500		353,500		Advances from the Federal Home Loan Bank	100,000		117,500
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	381,682		221,358		Borrowings, subordinated notes and debentures	334,077		445,244

Securities loaned	Securities loaned	447,748		728,988		Securities loaned	156,008		474,400
Customer, broker-dealer and clearing payables	Customer, broker-dealer and clearing payables	543,905		535,425		Customer, broker-dealer and clearing payables	420,947		511,654
Accounts payable and accrued liabilities and other liabilities		236,528		209,561
Accounts payable and other liabilities						Accounts payable and other liabilities	251,950		262,972
Total liabilities	Total liabilities	14,495,365		12,864,629		Total liabilities	16,953,476		15,758,192

COMMITMENTS AND CONTINGENCIES (Note 8)						COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS’ EQUITY:	STOCKHOLDERS’ EQUITY:					STOCKHOLDERS’ EQUITY:
Preferred stock—$0.01 par value; 1,000,000 shares authorized:

Common stock—$0.01 par value; 150,000,000 shares authorized; 68,617,410 shares issued and 59,662,795 shares outstanding as of March 31, 2022; 68,069,321 shares issued and 59,317,944 shares outstanding as of June 30, 2021		686		681

Common stock—$0.01 par value; 150,000,000 shares authorized; 69,153,591 shares issued and 60,000,079 shares outstanding as of December 31, 2022; 68,859,722 shares issued and 59,777,949 shares outstanding as of June 30, 2022						Common stock—$0.01 par value; 150,000,000 shares authorized; 69,153,591 shares issued and 60,000,079 shares outstanding as of December 31, 2022; 68,859,722 shares issued and 59,777,949 shares outstanding as of June 30, 2022	692		689
Additional paid-in capital	Additional paid-in capital	448,428		432,550		Additional paid-in capital	465,350		453,784
Accumulated other comprehensive income (loss)—net of tax	Accumulated other comprehensive income (loss)—net of tax	(1,626)		2,507		Accumulated other comprehensive income (loss)—net of tax	(6,945)		(2,933)
Retained earnings	Retained earnings	1,370,548		1,187,728		Retained earnings	1,568,403		1,428,444
Treasury stock, at cost; 8,954,615 shares as of March 31, 2022 and 8,751,377 shares as of June 30, 2021		(232,451)		(222,530)
Treasury stock, at cost; 9,153,512 shares as of December 31, 2022 and 9,081,773 shares as of June 30, 2022						Treasury stock, at cost; 9,153,512 shares as of December 31, 2022 and 9,081,773 shares as of June 30, 2022	(239,941)		(237,011)
Total stockholders’ equity	Total stockholders’ equity	1,585,585		1,400,936		Total stockholders’ equity	1,787,559		1,642,973
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	16,080,950	$	14,265,565	TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	18,741,035	$	17,401,165

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					December 31,				December 31,
(Dollars in thousands, except earnings per common share)	(Dollars in thousands, except earnings per common share)	2022		2021		2022		2021		(Dollars in thousands, except earnings per common share)	2022		2021		2022		2021
INTEREST AND DIVIDEND INCOME:	INTEREST AND DIVIDEND INCOME:									INTEREST AND DIVIDEND INCOME:
Loans, including fees	Loans, including fees	$	153,873	$	147,936	$	452,518	$	436,445	Loans, including fees	$	255,661	$	149,469	$	463,999	$	298,645
Securities borrowed and customer receivables	Securities borrowed and customer receivables	3,833		4,453		16,050		14,196		Securities borrowed and customer receivables	4,321		5,366		8,705		12,217
Investments	Investments	2,475		3,285		6,999		10,301		Investments	19,606		2,241		30,670		4,524
Total interest and dividend income	Total interest and dividend income	160,181		155,674		475,567		460,942		Total interest and dividend income	279,588		157,076		503,374		315,386
INTEREST EXPENSE:	INTEREST EXPENSE:									INTEREST EXPENSE:
Deposits	Deposits	6,924		14,034		22,441		49,683		Deposits	71,348		7,805		103,853		15,517
Advances from the Federal Home Loan Bank	Advances from the Federal Home Loan Bank	973		992		2,962		3,690		Advances from the Federal Home Loan Bank	2,504		973		7,667		1,989
Securities loaned	Securities loaned	152		453		621		832		Securities loaned	1,067		218		2,010		469
Other borrowings	Other borrowings	2,594		4,526		7,795		9,649		Other borrowings	4,759		2,512		9,459		5,201
Total interest expense	Total interest expense	10,643		20,005		33,819		63,854		Total interest expense	79,678		11,508		122,989		23,176
Net interest income	Net interest income	149,538		135,669		441,748		397,088		Net interest income	199,910		145,568		380,385		292,210
Provision for credit losses	Provision for credit losses	4,500		2,700		12,500		22,500		Provision for credit losses	3,500		4,000		12,250		8,000
Net interest income, after provision for credit losses	Net interest income, after provision for credit losses	145,038		132,969		429,248		374,588		Net interest income, after provision for credit losses	196,410		141,568		368,135		284,210
NON-INTEREST INCOME:	NON-INTEREST INCOME:									NON-INTEREST INCOME:

Broker-dealer fee income										Broker-dealer fee income	9,812		6,332		18,990		12,794

Advisory fee income										Advisory fee income	6,983		8,035		13,942		13,339
Banking and service fees										Banking and service fees	10,143		8,486		16,657		15,166
Mortgage banking income										Mortgage banking income	641		4,640		4,006		9,910
Prepayment penalty fee income	Prepayment penalty fee income	2,793		1,342		9,073		4,289		Prepayment penalty fee income	750		3,294		1,942		6,280
Gain on sale – other		61		214		106		704
Mortgage banking income		5,729		9,037		15,594		39,255
Broker-dealer fee income		12,913		7,942		39,046		19,931
Banking and service fees		7,278		5,352		22,444		24,281
Total non-interest income	Total non-interest income	28,774		23,887		86,263		88,460		Total non-interest income	28,329		30,787		55,537		57,489
NON-INTEREST EXPENSE:	NON-INTEREST EXPENSE:									NON-INTEREST EXPENSE:
Salaries and related costs	Salaries and related costs	43,133		38,545		123,849		115,367		Salaries and related costs	49,720		39,979		96,716		80,716
Data processing	Data processing	12,274		10,171		36,565		27,772		Data processing	14,632		12,199		28,654		24,291
Depreciation and amortization	Depreciation and amortization	6,061		5,865		18,574		17,913		Depreciation and amortization	5,957		6,785		12,051		12,513
Advertising and promotional	Advertising and promotional	3,357		4,261		10,131		10,600		Advertising and promotional	10,899		3,402		17,269		6,774
Professional services	Professional services	4,346		5,712		14,834		17,340		Professional services	8,455		5,943		16,542		10,488
Occupancy and equipment	Occupancy and equipment	3,742		3,096		10,265		9,239		Occupancy and equipment	3,683		3,342		7,737		6,523
FDIC and regulatory fees	FDIC and regulatory fees	3,115		3,107		7,856		8,400		FDIC and regulatory fees	3,569		2,475		7,304		4,741
Broker-dealer clearing charges	Broker-dealer clearing charges	3,561		3,278		11,244		7,986		Broker-dealer clearing charges	3,739		3,678		6,568		7,683
General and administrative expense	General and administrative expense	7,230		6,772		23,951		18,033		General and administrative expense	6,874		8,216		30,774		16,721
Total non-interest expense	Total non-interest expense	86,819		80,807		257,269		232,650		Total non-interest expense	107,528		86,019		223,615		170,450
INCOME BEFORE INCOME TAXES	INCOME BEFORE INCOME TAXES	86,993		76,049		258,242		230,398		INCOME BEFORE INCOME TAXES	117,211		86,336		200,057		171,249
INCOME TAXES	INCOME TAXES	25,170		22,404		75,422		68,946		INCOME TAXES	35,659		25,549		60,098		50,252
NET INCOME	NET INCOME	$	61,823	$	53,645	$	182,820	$	161,452	NET INCOME	$	81,552	$	60,787	$	139,959	$	120,997
NET INCOME ATTRIBUTABLE TO COMMON STOCK		$	61,823	$	53,645	$	182,820	$	161,262

COMPREHENSIVE INCOME	COMPREHENSIVE INCOME	$	58,853	$	54,687	$	178,687	$	164,682	COMPREHENSIVE INCOME	$	80,377	$	60,131	$	135,947	$	119,834
Basic earnings per common share	Basic earnings per common share	$	1.04	$	0.91	$	3.07	$	2.72	Basic earnings per common share	$	1.36	$	1.02	$	2.34	$	2.04
Diluted earnings per common share	Diluted earnings per common share	$	1.02	$	0.89	$	3.02	$	2.67	Diluted earnings per common share	$	1.35	$	1.00	$	2.31	$	1.99

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		March 31,				March 31,					December 31,				December 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		2022		2021		(Dollars in thousands)	2022		2021		2022		2021
NET INCOME	NET INCOME	$	61,823	$	53,645	$	182,820	$	161,452	NET INCOME	$	81,552	$	60,787	$	139,959	$	120,997
Net unrealized gain (loss) from available-for-sale securities, net of tax expense (benefit) of $(1,238) and $460 for the three and $(1,726) and $1,400 for the nine months ended March 31, 2022 and 2021, respectively.		(2,970)		1,042		(4,133)		3,230
Net unrealized gain (loss) from available-for-sale securities, net of income tax expense (benefit) of $503 and $(274) for the three months and $1,718 and $(488) for the six months ended December 31, 2022 and 2021, respectively.										Net unrealized gain (loss) from available-for-sale securities, net of income tax expense (benefit) of $503 and $(274) for the three months and $1,718 and $(488) for the six months ended December 31, 2022 and 2021, respectively.	(1,175)		(656)		(4,012)		(1,163)

Other comprehensive income (loss)	Other comprehensive income (loss)	(2,970)		1,042		(4,133)		3,230		Other comprehensive income (loss)	(1,175)		(656)		(4,012)		(1,163)
Comprehensive income	Comprehensive income	$	58,853	$	54,687	$	178,687	$	164,682	Comprehensive income	$	80,377	$	60,131	$	135,947	$	119,834

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


		For the Three Months Ended March 31, 2022																														For the Three Months Ended December 31, 2022
		Preferred Stock			Common Stock					Additional Paid-in Capital				Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Tax			Treasury Stock				Total						Common Stock													Additional Paid-in Capital				Retained Earnings						Accumulated Other Comprehensive Income (Loss), Net of Income Tax						Treasury Stock						Total
					Number of Shares																					Number of Shares
(Dollars in thousands)	(Dollars in thousands)	Shares	Amount		Issued	Treasury	Outstanding	Amount										(Dollars in thousands)										Issued				Treasury			Outstanding			Amount
BALANCE—December 31, 2021		—	$	—	68,376,837	(8,878,262)	59,498,575	$	684			$	441,061			$	1,308,725				$	1,344					$	(228,657)		$	1,523,157
BALANCE—September 30, 2022																									BALANCE—September 30, 2022								69,151,152			(9,152,479)			59,998,673		$			692					$	459,101					$	1,486,851					$	(5,770)					$	(239,902)					$	1,700,972
Net income	Net income	—	—		—	—	—	—				—				61,823					—						—		61,823			Net income							—		—							—						—						—						81,552						—			—	81,552
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—	—	—		—				—		(2,970)			—				(2,970)			Other comprehensive income (loss)								—			—			—			—				—						—						(1,175)						—						(1,175)

Stock-based compensation expense and restricted stock unit vesting		—	—		240,573	(76,353)	164,220	2		7,367				—		—			(3,794)				3,575
Stock-based compensation activity																									Stock-based compensation activity								2,439			(1,033)			1,406		—				6,249						—						—						(39)						6,210

BALANCE—March 31, 2022		—	$	—	68,617,410	(8,954,615)	59,662,795	$	686	$	448,428			$	1,370,548	$	(1,626)		$	(232,451)			$	1,585,585
BALANCE—December 31, 2022																									BALANCE—December 31, 2022								69,153,591			(9,153,512)			60,000,079		$	692			$	465,350					$	1,568,403					$	(6,945)					$	(239,941)					$	1,787,559


		For the Nine Months Ended March 31, 2022																					For the Six Months Ended December 31, 2022
		Preferred Stock			Common Stock					Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Treasury Stock		Total				Common Stock									Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Treasury Stock		Total
					Number of Shares																		Number of Shares
(Dollars in thousands)	(Dollars in thousands)	Shares	Amount		Issued	Treasury	Outstanding	Amount													(Dollars in thousands)				Issued		Treasury		Outstanding											Amount
BALANCE—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
BALANCE—June 30, 2022																				BALANCE—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

Net income	Net income	—	—		—	—	—	—		—		182,820		—		—		182,820			Net income				—		—		—		—		—		139,959		—		—			139,959
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—	—	—		—		—		(4,133)		—		(4,133)			Other comprehensive income (loss)				—		—		—		—		—		—		(4,012)		—			(4,012)

Stock-based compensation expense and restricted stock unit vesting		—	—		548,089	(203,238)	344,851	5		15,878		—		—		(9,921)		5,962
Stock-based compensation activity																				Stock-based compensation activity				293,869		(71,739)		222,130		3		11,566		—		—		(2,930)			8,639

BALANCE—March 31, 2022		—	$	—	68,617,410	(8,954,615)	59,662,795	$	686	$	448,428	$	1,370,548	$	(1,626)	$	(232,451)	$	1,585,585
BALANCE—December 31, 2022																				BALANCE—December 31, 2022				69,153,591		(9,153,512)		60,000,079		$	692	$	465,350	$	1,568,403	$	(6,945)	$	(239,941)		$	1,787,559

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Continued)

(Unaudited)


		For the Three Months Ended March 31, 2021																														For the Three Months Ended December 31, 2021
		Preferred Stock			Common Stock					Additional Paid-in Capital				Retained Earnings		Accumulated Other Comprehensive Income (Loss), Net of Income Tax			Treasury Stock				Total						Common Stock													Additional Paid-in Capital				Retained Earnings						Accumulated Other Comprehensive Income (Loss), Net of Income Tax						Treasury Stock						Total
					Number of Shares																					Number of Shares
(Dollars in thousands)	(Dollars in thousands)	Shares	Amount		Issued	Treasury	Outstanding	Amount										(Dollars in thousands)										Issued				Treasury			Outstanding			Amount
BALANCE—December 31, 2020		—	$	—	67,668,664	(8,595,842)	59,072,822	$	677			$	420,895			$	1,079,828				$	1,251					$	(215,169)		$	1,287,482
BALANCE—September 30, 2021																									BALANCE—September 30, 2021								68,370,617			(8,875,984)			59,494,633		$			684					$	436,528					$	1,247,938					$	2,000					$	(228,529)					$	1,458,621
Net income	Net income	—	—		—	—	—	—				—				53,645					—						—		53,645			Net income							—		—							—						—						—						60,787						—			—	60,787
Other comprehensive income (loss)	Other comprehensive income (loss)	—	—		—	—	—	—		—				—		1,042			—				1,042			Other comprehensive income (loss)								—			—			—			—				—						—						(656)						—						(656)

Stock-based compensation expense and restricted stock unit vesting		—	—		233,575	(68,632)	164,943	2		6,768				—		—			(3,289)				3,481
Stock-based compensation activity																									Stock-based compensation activity								6,220			(2,278)			3,942		—				4,533						—						—						(128)						4,405

BALANCE—March 31, 2021		—	$	—	67,902,239	(8,664,474)	59,237,765	$	679	$	427,663			$	1,133,473	$	2,293		$	(218,458)			$	1,345,650
BALANCE—December 31, 2021																									BALANCE—December 31, 2021								68,376,837			(8,878,262)			59,498,575		$	684			$	441,061					$	1,308,725					$	1,344					$	(228,657)					$	1,523,157

For the Nine Months Ended March 31, 2021
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—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 — — — — — — — 161,452 — — 161,452
Other comprehensive income (loss) — — — — — — — — 3,230 — 3,230
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 — — 579,186 (200,459) 378,727 6 15,790 — — (6,576) 9,220
BALANCE—March 31, 2021 — $ — 67,902,239 (8,664,474) 59,237,765 $ 679 $ 427,663 $ 1,133,473 $ 2,293 $ (218,458) $ 1,345,650


		For the Six Months Ended December 31, 2021
	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)			Issued	Treasury	Outstanding											Amount
BALANCE—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			—	—	—	—		—		120,997		—		—			120,997
Other comprehensive income (loss)			—	—	—	—		—		—		(1,163)		—			(1,163)







Stock-based compensation activity			307,516	(126,885)	180,631	3		8,511		—		—		(6,127)			2,387

BALANCE—December 31, 2021			68,376,837	(8,878,262)	59,498,575	$	684	$	441,061	$	1,308,725	$	1,344	$	(228,657)		$	1,523,157

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended
March 31,
(Dollars in thousands) 2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 182,820 $ 161,452
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion and amortization on securities, net (297) (124)
Net accretion of discounts on loans and leases (5,143) (4,717)
Amortization of borrowing costs 447 1,431
Amortization of operating lease right of use asset 8,147 7,965
Stock-based compensation expense 15,883 15,796
Trading activity 1,617 42
Provision for credit losses 12,500 22,500
Deferred income taxes (4,184) (10,388)
Origination of loans held for sale (569,614) (1,349,683)
Unrealized loss on loans held for sale 965 781
Gain on sales of loans held for sale (15,700) (39,959)
Proceeds from sale of loans held for sale 592,803 1,378,323
Amortization and change in fair value of mortgage servicing rights (1,229) 5,266
(Gain) on sale of other real estate and foreclosed assets (385) (113)
Depreciation and amortization 18,574 17,913
Net changes in assets and liabilities which provide (use) cash:
Securities borrowed 344,444 (321,170)
Customer, broker-dealer and clearing receivables (137,069) (130,797)
Other assets (121,125) 40,162
Securities loaned (281,240) 393,892
Customer, broker-dealer and clearing payables 8,480 136,063
Accounts payable and other liabilities 14,516 (11,908)
Net cash provided by operating activities 65,210 312,727
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities (107,286) (66,617)
Proceeds from sales of securities 75,023 —
Proceeds from repayment of securities 59,549 57,518
Purchase of stock of regulatory agencies (22,739) (17)
Proceeds from redemption of stock of regulatory agencies 22,739 —
Origination of loans held for investment (7,173,040) (3,936,776)
Proceeds from sale of loans held for investment 106,324 18,011
Mortgage warehouse loans activity, net 191,291 (493,764)
Proceeds from sales of other real estate owned and repossessed assets 7,968 839
Acquisition of business activity, net of cash paid (54,597) —
Purchases of loans and leases, net of discounts and premiums (31,496) (2,184)
Principal repayments on loans 5,218,247 3,305,931
Purchases of furniture, equipment, software and intangibles (11,817) (8,986)
Net cash used in investing activities (1,719,834) (1,126,045)

~~Table of Contents~~

~~AXOS FINANCIAL, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(Unaudited)~~


		Nine Months Ended					Six Months Ended
		March 31,					December 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		(Dollars in thousands)	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:						CASH FLOWS FROM OPERATING ACTIVITIES:
Net income						Net income	$	139,959	$	120,997
Adjustments to reconcile net income to net cash provided by operating activities:						Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, amortization, and accretion						Depreciation, amortization, and accretion	12,580		14,287
Stock-based compensation expense						Stock-based compensation expense	11,569		8,514
Trading activity						Trading activity	1,386		760

Provision for credit losses						Provision for credit losses	12,250		8,000

Deferred income taxes						Deferred income taxes	7,592		(1,468)
Origination of loans held for sale						Origination of loans held for sale	(113,300)		(403,287)

Unrealized and realized gains on loans held for sale						Unrealized and realized gains on loans held for sale	(4,115)		(8,673)
Proceeds from sale of loans held for sale						Proceeds from sale of loans held for sale	117,252		410,918
Amortization and change in fair value of mortgage servicing rights						Amortization and change in fair value of mortgage servicing rights	93		1,087

Net changes in assets and liabilities which provide (use) cash:						Net changes in assets and liabilities which provide (use) cash:

Securities borrowed						Securities borrowed	280,134		84,845
Customer, broker-dealer and clearing receivables						Customer, broker-dealer and clearing receivables	144,838		(1,702)
Other assets						Other assets	(19,062)		(102,551)

Securities loaned						Securities loaned	(318,392)		(150,226)
Customer, broker-dealer and clearing payables						Customer, broker-dealer and clearing payables	(90,707)		(61,069)
Accounts payable and other liabilities						Accounts payable and other liabilities	(5,001)		7,067
Net cash provided by (used in) operating activities						Net cash provided by (used in) operating activities	177,076		(72,501)
CASH FLOWS FROM INVESTING ACTIVITIES:						CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities						Purchases of investment securities	—		(12,286)

Proceeds from sale and repayment of securities						Proceeds from sale and repayment of securities	9,111		129,351
Purchase of stock of regulatory agencies						Purchase of stock of regulatory agencies	(74,972)		(13,631)
Proceeds from redemption of stock of regulatory agencies						Proceeds from redemption of stock of regulatory agencies	74,972		13,631
Origination of loans held for investment						Origination of loans held for investment	(4,499,800)		(4,636,661)
Proceeds from sale of loans held for investment						Proceeds from sale of loans held for investment	13,965		36,943
Mortgage warehouse loans activity, net						Mortgage warehouse loans activity, net	136,545		18,511
Proceeds from sales of other real estate owned and repossessed assets						Proceeds from sales of other real estate owned and repossessed assets	1,229		7,454

Acquisition of business activity, net of cash acquired						Acquisition of business activity, net of cash acquired	(5,531)		(54,761)
Purchases of loans and leases, net of discounts and premiums						Purchases of loans and leases, net of discounts and premiums	(127)		(30,153)
Principal repayments on loans						Principal repayments on loans	2,947,186		3,413,366
Purchases of furniture, equipment, software and intangibles						Purchases of furniture, equipment, software and intangibles	(13,982)		(8,730)
Net cash used in investing activities						Net cash used in investing activities	(1,411,404)		(1,136,966)
CASH FLOWS FROM FINANCING ACTIVITIES:	CASH FLOWS FROM FINANCING ACTIVITIES:					CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	Net increase in deposits	1,917,205		275,807		Net increase in deposits	1,744,072		1,453,375

Payments of the Federal Home Loan Bank term advances	Payments of the Federal Home Loan Bank term advances	(15,000)		(65,000)		Payments of the Federal Home Loan Bank term advances	(17,500)		(10,000)
Net repayment of Federal Home Loan Bank other advances	Net repayment of Federal Home Loan Bank other advances	(186,000)		(5,000)		Net repayment of Federal Home Loan Bank other advances	—		(186,000)
Net proceeds of other borrowings		11,800		7,281
Redemption of subordinated notes		—		(51,000)
Net proceeds (repayments) of other borrowings						Net proceeds (repayments) of other borrowings	(111,500)		38,800

Tax payments related to settlement of restricted stock units	Tax payments related to settlement of restricted stock units	(9,921)		(6,576)		Tax payments related to settlement of restricted stock units	(2,930)		(6,127)
Redemption of preferred stock, Series A		—		(5,150)
Repurchase of treasury stock		—		(16,757)
Cash dividends paid on preferred stock		—		(103)
Payment of debt issuance costs		(1,923)		(2,748)
Proceeds from issuance of subordinated notes		150,000		175,000

Net cash provided by financing activities	Net cash provided by financing activities	1,866,161		305,754		Net cash provided by financing activities	1,612,142		1,290,048
NET CHANGE IN CASH AND CASH EQUIVALENTS	NET CHANGE IN CASH AND CASH EQUIVALENTS	211,537		(507,564)		NET CHANGE IN CASH AND CASH EQUIVALENTS	377,814		80,581
CASH AND CASH EQUIVALENTS—Beginning of year	CASH AND CASH EQUIVALENTS—Beginning of year	$	1,037,777	$	1,950,519	CASH AND CASH EQUIVALENTS—Beginning of year	$	1,574,699	$	1,037,777
CASH AND CASH EQUIVALENTS—End of period	CASH AND CASH EQUIVALENTS—End of period	$	1,249,314	$	1,442,955	CASH AND CASH EQUIVALENTS—End of period	$	1,952,513	$	1,118,358

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:	SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:					SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on deposits and borrowed funds	Interest paid on deposits and borrowed funds	$	31,974	$	59,154	Interest paid on deposits and borrowed funds	$	121,878	$	23,429
Income taxes paid	Income taxes paid	80,512		72,236		Income taxes paid	73,129		57,763
Transfers to other real estate and repossessed vehicles	Transfers to other real estate and repossessed vehicles	1,186		1,223		Transfers to other real estate and repossessed vehicles	7,228		342
Transfers from loans held for investment to loans held for sale	Transfers from loans held for investment to loans held for sale	105,884		8,680		Transfers from loans held for investment to loans held for sale	—		36,943
Transfers from loans held for sale to loans held for investment	Transfers from loans held for sale to loans held for investment	1,410		28,125		Transfers from loans held for sale to loans held for investment	690		794

Operating lease liabilities for obtaining right of use assets	Operating lease liabilities for obtaining right of use assets	12,009		—		Operating lease liabilities for obtaining right of use assets	—		4,167
Impact of adoption of ASU No. 2016-13 on retained earnings		—		37,088

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND ~~NINE~~SIX MONTH PERIODS ENDED ~~MARCH~~DECEMBER 31, 2022 AND 2021

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

(Unaudited)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed 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 Bank and its wholly owned subsidiary constitute the Banking Business segment and Axos Nevada Holding wholly owns the companies constituting the Securities Business segment. All significant intercompany balances and transactions have been eliminated in consolidation.

The accompanying interim condensed consolidated financial statements, presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), are unaudited and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of financial condition and results of operations for the interim periods. All adjustments are of a normal and recurring nature. Results for the ~~nine~~three and six months ended ~~March~~December 31, 2022 are not necessarily indicative of results that may be expected for any other interim period or for the year as a whole. Certain information and note disclosures normally included in the audited annual financial statements prepared in accordance with GAAP have been condensed or ~~omitted~~not repeated herein pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) with respect to interim financial reporting. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended June 30, ~~2021~~2022 included in our Annual Report on Form ~~10-K.~~10-K filed with the SEC for the fiscal year ended June 30, 2022 (“2022 Form 10-K”). A reclassification of certain components of non-interest income for the three and six months ended December 31, 2021 has been made to conform to the current period presentation. This reclassification had no effect on the Company’s total non-interest income, net income, financial position or cash flows. Additional reclassifications of certain amounts in the Condensed Consolidated Statement of Cash Flows for the six months ended December 31, 2021 have been made to conform to the current period presentation. These reclassifications had no effect on the Company’s results of operations or financial position.

Significant Accounting Policies

Our significant accounting policies are described in greater detail in Note 1 ~~- “Summary~~—“Organizations and Summary of Significant Accounting Policies” contained in ~~our Annual Report on~~the 2022 Form ~~10-K filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2021.~~10-K.

New Accounting Standards

Accounting Standards Issued But Not Yet Adopted

~~In March 2022,~~The Financial Accounting Standards Board has issued three Accounting Standards Updates (“ASUs”) (2020-04, 2021-04 and 2022-06) all of which provide guidance to alleviate the ~~FASB issued ASU 2022-02, Financial Instruments-Credit Losses (Topic 326), Troubled Debt Restructurings~~burden in accounting for reference rate reform by allowing certain expedients and ~~Vintage Disclosures. ASU 2022-02 addresses areas identified~~exceptions in applying generally accepted accounting principles to contracts, hedging relationships, and other transactions impacted by ~~the FASB as part of its post-implementation review~~reference rate reform. The provisions apply only to those transactions that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. Adoption of the ~~credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model~~provisions are optional and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. The amendment would becomeare effective ~~for the Company on July 1, 2023. Early adoption is permitted.~~from March 12, 2020 through December 31, 2024. The Company is evaluating the impact ~~of ASU 2022-02~~ on the Company’s ~~consolidated financial statements,~~Consolidated Financial Statements, but it does not expect any application of the ~~adoption~~provisions of these ASUs to have a material impact. ~~The~~For a further discussion of new accounting standards issued but not yet adopted which are applicable to the Company ~~will be required to update disclosures around financing receivables~~see Note 1—“Organizations and ~~net investment~~Summary of Significant Accounting Policies” contained in ~~leases.~~

the 2022 Form 10-K.

Table of Contents

2. ACQUISITIONS

From time to time the Company completes acquisitions and related corporate activities to supplement the organic growth and development of the business.

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 purchase price of $54.8 million consisted entirely of cash consideration paid upon acquisition and working capital adjustments.

The Company incurred acquisition-related costs totaling $0.04 million ~~for the nine months ended March 31, 2022. There~~in total, all of which were ~~no costs~~recognized in the ~~three months March 31,~~year ended June 30, 2022. ~~These costs are recognized in general and administrative expenses in the unaudited consolidated statements of income.~~

The acquisition is accounted for as a business combination under the acquisition method of accounting. Accordingly, tangible and intangible assets acquired (and liabilities assumed) are recorded at their estimated fair values as of the date of acquisition. The Company allocated the purchase price to the tangible and intangible assets acquired based on information available through March 31, 2022. 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.

~~The~~ preliminary allocation of the $54.6 million purchase price ~~consists~~consisted of ~~$6.5~~$14.4 million of fair value of tangible assets acquired ~~$3.4~~(which included $7.8 million of a right-of-use lease asset), $11.3 million of liabilities assumed (which included $7.8 million of a lease liability), $27.1 million of identifiable intangible assets and $24.4 million of goodwill, all of which is expected to be deductible for tax purposes. In December 2021, the 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 final acquisition fair value of tangible assets acquired ~~is $6.4~~was $14.2 million and the final acquisition fair value of liabilities acquired ~~is $3.1~~was $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~~Company’s existing product offerings and leveraging customer relationships through ~~RIAs.~~registered investment advisors (“RIAs”). The following table summarizes the fair value and useful life of each intangible asset acquired as of the acquisition date:

($ 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
$ 27,060


(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 ~~pro forma results of operations and~~following table presents the results of operations ~~since~~of AAS for the six months ended December 31, 2021 on an unaudited pro forma basis, as if the acquisition ~~date~~of the entity rebranded to AAS had been consummated on July 1, 2020. The results of operations of AAS for the three months ended December 31, 2021 are reflected in the unaudited Condensed Consolidated Statements of Income. The unaudited pro forma financial information is provided for 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 does not ~~been separately disclosed because~~reflect any synergies or other strategic benefits as a result of acquisition.

Pro Forma Revenue

(Dollars in thousands)

For the Six Months Ended December 31, 2021

Non-interest income

17,230

It is not practical to disclose net income on a pro forma basis as the ~~effects were not material to the consolidated financial statements.~~

assets and liabilities acquired are a component of a business.

Table of Contents

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, ~~Fair Value Measurement, 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 ~~following table sets forth the~~ Company’s financial assets and liabilities measured at fair value on a recurring basis at ~~March~~December 31, 2022 and June 30, ~~2021. Assets and liabilities~~2022 are classified in their entirety based on the lowest level of input ~~that is~~ significant to the fair value ~~measurement:~~measurement.


		March 31, 2022									December 31, 2022
(Dollars in thousands)	(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		(Dollars in thousands)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
ASSETS:	ASSETS:									ASSETS:
Securities—Trading: Municipal	Securities—Trading: Municipal	$	—	$	366	$	—	$	366	Securities—Trading: Municipal		$	372	$	—	$	372
Securities—Available-for-Sale:	Securities—Available-for-Sale:									Securities—Available-for-Sale:

Agency MBS1	Agency MBS1	—		27,203		—		27,203		Agency MBS1		22,796		—		22,796
Non-Agency MBS2	Non-Agency MBS2	—		—		151,479		151,479		Non-Agency MBS2		—		175,123		175,123
Municipal	Municipal	—		3,311		—		3,311		Municipal		3,327		—		3,327
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		47,517		—		47,517		Asset-backed securities and structured notes		46,816		—		46,816
Total—Securities—Available-for-Sale	Total—Securities—Available-for-Sale	$	—	$	78,031	$	151,479	$	229,510	Total—Securities—Available-for-Sale		$	72,939	$	175,123	$	248,062
Loans Held for Sale	Loans Held for Sale	$	—	$	19,611	$	—	$	19,611	Loans Held for Sale		$	4,292	$	—	$	4,292
Mortgage servicing rights	Mortgage servicing rights	$	—	$	—	$	23,519	$	23,519	Mortgage servicing rights		$	—	$	25,526	$	25,526
Other assets—Derivative instruments	Other assets—Derivative instruments	$	—	$	—	$	2,154	$	2,154	Other assets—Derivative instruments		$	—	$	136	$	136
LIABILITIES:	LIABILITIES:									LIABILITIES:
Other liabilities—Derivative instruments	Other liabilities—Derivative instruments	$	—	$	—	$	1,004	$	1,004	Other liabilities—Derivative instruments		$	—	$	118	$	118

		June 30, 2021									June 30, 2022
(Dollars in thousands)	(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		(Dollars in thousands)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
ASSETS:	ASSETS:									ASSETS:
Securities—Trading: Municipal	Securities—Trading: Municipal	$	—	$	1,983	$	—	$	1,983	Securities—Trading: Municipal		$	1,758	$	—	$	1,758
Securities—Available-for-Sale:	Securities—Available-for-Sale:									Securities—Available-for-Sale:

Agency MBS1	Agency MBS1	—		23,913		—		23,913		Agency MBS1		25,325		—		25,325
Non-Agency MBS2	Non-Agency MBS2	—		—		67,615		67,615		Non-Agency MBS2		—		186,814		186,814
Municipal	Municipal	—		3,565		—		3,565		Municipal		3,248		—		3,248
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		92,242		—		92,242		Asset-backed securities and structured notes		47,131		—		47,131
Total—Securities—Available-for-Sale	Total—Securities—Available-for-Sale	$	—	$	119,720	$	67,615	$	187,335	Total—Securities—Available-for-Sale		$	75,704	$	186,814	$	262,518
Loans Held for Sale	Loans Held for Sale	$	—	$	29,768	$	—	$	29,768	Loans Held for Sale		$	4,973	$	—	$	4,973
Mortgage servicing rights	Mortgage servicing rights	$	—	$	—	$	17,911	$	17,911	Mortgage servicing rights		$	—	$	25,213	$	25,213
Other assets—Derivative instruments	Other assets—Derivative instruments	$	—	$	—	$	2,280	$	2,280	Other assets—Derivative instruments		$	—	$	464	$	464
LIABILITIES:	LIABILITIES:									LIABILITIES:
Other liabilities—Derivative instruments	Other liabilities—Derivative instruments	$	—	$	—	$	75	$	75	Other liabilities—Derivative instruments		$	—	$	—	$	—

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.

109

Table of Contents

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

For the Three Months Ended
March 31, 2022
(Dollars in thousands) Securities – Available-for-Sale: Non-Agency MBS Mortgage Servicing Rights Derivative Instruments, net Total
Opening balance $ 58,752 $ 20,110 $ 1,377 $ 80,239
Total gains or losses for the period:
Included in earnings—Mortgage banking income — 2,316 (227) 2,089
Included in other comprehensive income (1,841) — — (1,841)
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions 95,000 1,093 — 96,093
Settlements (432) — — (432)
Closing balance $ 151,479 $ 23,519 $ 1,150 $ 176,148
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period $ — $ 2,316 $ (227) $ 2,089
For the Nine Months Ended
March 31, 2022
(Dollars in thousands) Securities – Available-for-Sale: Non-Agency RMBS Mortgage Servicing Rights Derivative Instruments, net Total
Opening Balance $ 67,615 $ 17,911 $ 2,205 $ 87,731
Total gains or losses for the period:
Included in earnings—Mortgage banking income — 1,229 (1,055) 174
Included in other comprehensive income (2,480) — — (2,480)
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions 95,000 4,379 — 99,379
Settlements (8,656) — — (8,656)
Closing balance $ 151,479 $ 23,519 $ 1,150 $ 176,148
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period $ — $ 1,229 $ (1,055) $ 174


	For the Three Months Ended
	December 31, 2022
(Dollars in thousands)	Securities – Available-for-Sale: Non-Agency MBS		Mortgage Servicing Rights1		Derivative Instruments, net		Total
Opening balance	$	184,012	$	26,373	$	535	$	210,920


Total gains or losses for the period:


Included in earnings—Mortgage banking income	—		(1,046)		(517)		(1,563)
Included in other comprehensive income	(2,143)		—		—		(2,143)
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	—		199		—		199


Settlements	(6,746)		—		—		(6,746)

Closing balance	$	175,123	$	25,526	$	18	$	200,667

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	(1,046)	$	(517)	$	(1,563)

	For the Six Months Ended
	December 31, 2022
(Dollars in thousands)	Securities – Available-for-Sale: Non-Agency RMBS		Mortgage Servicing Rights1		Derivative Instruments, net		Total
Opening Balance	$	186,814	$	25,213	$	464	$	212,491


Total gains or losses for the period:


Included in earnings—Mortgage banking income	—		(93)		(446)		(539)
Included in other comprehensive income	(4,616)		—		—		(4,616)
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	—		406		—		406


Settlements	(7,075)		—		—		(7,075)

Closing balance	$	175,123	$	25,526	$	18	$	200,667

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	(93)	$	(446)	$	(539)

1 Earnings from mortgage servicing rights (“MSR”) 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 $0.1 million and $0.5 million for the three and six months ended December 31, 2022, respectively, and a decrease in MSR value resulting from market-driven changes in interest rates of $0.9 million for the three months ended December 31, 2022 and an increase of $0.4 million for the six months ended December 31, 2022. Additions to mortgage servicing rights were retained upon sale of loans held for sale.

1110

Table of Contents


		For the Three Months Ended										For the Three Months Ended
		March 31, 2021										December 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Securities – Available-for-Sale: Non-Agency MBS		Mortgage Servicing Rights		Derivative Instruments, net		Total		(Dollars in thousands)		Securities – Available-for-Sale: Non-Agency MBS		Mortgage Servicing Rights1		Derivative Instruments, net		Total

Opening balance	Opening balance	$	17,135	$	14,314	$	7,979	$	39,428	Opening balance		$	59,851	$	18,438	$	2,226	$	80,515

Total gains or losses for the period:	Total gains or losses for the period:									Total gains or losses for the period:

Included in earnings—Mortgage banking income	Included in earnings—Mortgage banking income	—		(1,221)		(1,151)		(2,372)		Included in earnings—Mortgage banking income		—		97		(849)		(752)
Included in other comprehensive income	Included in other comprehensive income	913		—		—		913		Included in other comprehensive income		(527)		—		—		(527)
Purchases, retentions, issues, sales and settlements:	Purchases, retentions, issues, sales and settlements:									Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	Purchases/Retentions	—		3,538		—		3,538		Purchases/Retentions		—		1,575		—		1,575

Settlements	Settlements	(671)		—		—		(671)		Settlements		(572)		—		—		(572)

Closing balance	Closing balance	$	17,377	$	16,631	$	6,828	$	40,836	Closing balance		$	58,752	$	20,110	$	1,377	$	80,239

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	(1,221)	$	(1,151)	$	(2,372)	Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period		$	—	$	97	$	(849)	$	(752)

		For the Nine Months Ended										For the Six Months Ended
		March 31, 2021									December 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Securities – Available-for-Sale: Non-Agency RMBS		Mortgage Servicing Rights		Derivative Instruments, net		Total		(Dollars in thousands)		Securities – Available-for-Sale: Non-Agency RMBS		Mortgage Servicing Rights1		Derivative Instruments, net		Total
Opening Balance	Opening Balance	$	18,332	$	10,675	$	7,416	$	36,423	Opening Balance		$	67,615	$	17,911	$	2,205	$	87,731

Total gains or losses for the period:	Total gains or losses for the period:									Total gains or losses for the period:

Included in earnings—Mortgage banking income	Included in earnings—Mortgage banking income	—		(5,266)		(588)		(5,854)		Included in earnings—Mortgage banking income		—		(1,087)		(828)		(1,915)
Included in other comprehensive income	Included in other comprehensive income	607		—		—		607		Included in other comprehensive income		(639)		—		—		(639)
Purchases, retentions, issues, sales and settlements:	Purchases, retentions, issues, sales and settlements:									Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	Purchases/Retentions	—		11,222		—		11,222		Purchases/Retentions		—		3,286		—		3,286

Settlements	Settlements	(1,562)		—		—		(1,562)		Settlements		(8,224)		—		—		(8,224)

Closing balance	Closing balance	$	17,377	$	16,631	$	6,828	$	40,836	Closing balance		$	58,752	$	20,110	$	1,377	$	80,239

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	(5,266)	$	(588)	$	(5,854)	Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period		$	—	$	(1,087)	$	(828)	$	(1,915)

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 $1.3 million and $2.8 million for the three and six months ended December 31, 2021, respectively, and an increase in MSR value resulting from market-driven changes in interest rates of $1.4 million and $1.8 million for the three and six months ended December 31, 2021, respectively. Additions to mortgage servicing rights were retained upon sale of loans held for sale.

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

~~March~~December 31, 2022

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Securities – Non-agency MBS

~~151,479~~175,123

Discounted Cash Flow

Projected Constant Prepayment Rate,
Projected Constant Default Rate,
Projected Loss Severity,
Discount Rate over LIBOR

0.0 to 30.0% ~~(19.3%~~(21.9%)

0.0 to ~~6.7% (2.0%~~6.1% (2.2%)

0.0 to ~~68.3% (24.9%~~68.7% (27.4%)

~~2.7~~2.6 to ~~6.5% (2.8%~~7.1% (2.7%)

Mortgage Servicing Rights

~~23,519~~25,526

Discounted Cash Flow

Projected Constant Prepayment Rate,
Life (in years),
Discount Rate

~~9.8~~6.2 to ~~51.0% (13.4%~~26.4% (11.5%)

~~1.4~~0.7 to ~~8.6 (7.2)~~12.2 (8.0)

9.5 to ~~11.3% (9.5%~~11.5% (9.6%)

Derivative Instruments

~~1,150~~18

Sales Comparison Approach

Projected Sales Profit of Underlying Loans

~~(1.0)~~-1.6 to ~~0.2% ((0.2)%~~1.2% (0.1%)

Table of Contents

June 30, ~~2021~~2022

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Securities – Non-agency MBS

~~67,615~~186,814

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%~~30.0% (21.4%)

0.0 to ~~5.6% (0.6%~~7.9% (2.2%)

0.0 to ~~100.0% (19.4%~~68.4% (26.7%)

2.7 to ~~7.2% (3.1%~~9.3% (2.8%)

Mortgage Servicing Rights

~~17,911~~25,213

Discounted Cash Flow

Projected Constant Prepayment Rate,
Life (in years),
Discount Rate

~~7.5~~7.9 to ~~37.4% (11.5%~~56.3% (11.0%)

~~1.7~~1.2 to ~~7.5 (6.4)~~9.9 (8.4)

9.5 to ~~13.0% (9.6%~~11.5% (9.5%)

Derivative Instruments

~~2,205~~464

Sales Comparison Approach

Projected Sales Profit of Underlying Loans

~~0.2~~-3.1 to ~~0.5% (0.3%~~0.8% (-1.2%)

~~Table of Contents~~

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.~~default and discount rate over LIBOR. 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 assets measured for impairment on a non-recurring basis:


		March 31, 2022									December 31, 2022
(Dollars in thousands)	(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		(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:
Other real estate owned and repossessed vehicles:										Other real estate owned and repossessed vehicles:
Single family real estate										Single family real estate	$	—	$	—	$	4,383	$	4,383

Autos and RVs		$	—	$	—	$	564	$	564
Autos										Autos	$	—	$	—	$	1,421	$	1,421
Total	Total	$	—	$	—	$	564	$	564	Total	$	—	$	—	$	5,804	$	5,804

		June 30, 2021									June 30, 2022
(Dollars in thousands)	(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		(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
Other real estate owned and repossessed vehicles:										Other real estate owned and repossessed vehicles:

Autos and RVs		—		—		235		235

Autos										Autos	—		—		798		798
Total	Total	$	—	$	—	$	6,782	$	6,782	Total	$	—	$	—	$	798	$	798

~~Other~~Non-recurring fair value measurements for 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 $564 after~~repossessed vehicles represent charge-offs of ~~$79~~$657 thousand and $37 thousand for the ~~nine~~three months ended ~~March~~December 31, ~~2022.~~2022 and December 31, 2021, respectively, and $964 thousand and $49 thousand for the six months ended December 31, 2022 and December 31, 2021, respectively.

The Company has elected the fair value option for Agency loans held for sale. ~~These~~Given these loans are intended for sale, ~~and the Company believes that the~~ fair value is considered to be the best indicator of the ~~resolution of~~amount to be realized from these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans. None of these loans are 90 days or more past due nor on nonaccrual as of ~~March~~December 31, 2022 and June 30, ~~2021.~~2022.

As of ~~March~~December 31, 2022 and June 30, ~~2021,~~2022, the aggregate fair value of loans held for sale, carried at fair value, contractual balance (including accrued interest), and unrealized gain ~~(loss)~~ was as follows:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2022		June 30, 2021		(Dollars in thousands)	December 31, 2022		June 30, 2022
Aggregate fair value	Aggregate fair value	$	19,611	$	29,768	Aggregate fair value	$	4,292	$	4,973
Contractual balance	Contractual balance	19,749		28,940		Contractual balance	4,182		4,881
Unrealized gain (loss)		$	(138)	$	828
Unrealized gain						Unrealized gain	$	110	$	92

~~The total amount~~

Table of ~~gains~~Contents

Gains and losses from changes in fair value included in earnings for ~~the period indicated below for~~ loans held for sale for the periods indicated below were:

For the Three Months Ended For the Nine Months Ended
March 31, March 31,
(Dollars in thousands) 2022 2021 2022 2021
Interest income $ 204 $ 387 $ 598 $ 1,189
Change in fair value (1,041) (1,829) (2,019) (1,369)
Total $ (837) $ (1,442) $ (1,421) $ (180)

~~Table of Contents~~


	For the Three Months Ended				For the Six Months Ended
	December 31,				December 31,
(Dollars in thousands)	2022		2021		2022		2021
Interest income	$	103	$	194	$	153	$	394
Change in fair value	(422)		(1,021)		(331)		(978)
Total	$	(319)	$	(827)	$	(178)	$	(584)

The following table presents quantitative information about level 3 fair value measurements for ~~financial instruments~~other real estate owned and repossessed vehicles measured at fair value on a non-recurring basis at the periods indicated:

~~March~~December 31, 2022

(Dollars in thousands)

Fair Value

Valuation Technique(s)

Unobservable Input

Range (Weighted Average) 1

Other real estate owned and ~~foreclosed assets:~~repossessed vehicles:

~~Autos and RVs~~Single family real estate

~~564~~4,383

Sales comparison approach

Adjustment for differences between the comparable sales

~~(10.6)~~3.5 to ~~15.5% ((2.7)%~~12.1% (4.1%)

Autos

1,421

Sales comparison approach

Adjustment for differences between the comparable sales

-20.3 to -7.8% (-9.1%)

June 30, ~~2021~~2022

(Dollars in thousands)

Fair Value

Valuation Technique(s)

Unobservable Input

Range (Weighted Average) 1

Other real estate owned and ~~foreclosed assets:~~repossessed vehicles:

~~Single family real estate~~Autos

~~6,547~~798

Sales comparison approach

Adjustment for differences between the comparable sales

~~(1.5)~~-17.2 to ~~6.1% (2.0%)~~

~~Autos and RVs~~

~~235~~

~~Sales comparison approach~~

~~Adjustment for differences between the comparable sales~~

~~(2.1) to 14.7% (2.1%~~4.6% (-7.5%)

1 For other real estate owned and ~~foreclosed assets~~repossessed vehicles 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~~asset being valued having limited comparable sales with similar characteristics at the time the current appraisal is conducted.

1413

Table of Contents

Fair ~~value~~Value of Financial Instruments

~~The carrying~~Carrying amounts and estimated fair values of financial instruments at ~~March~~December 31, 2022 and June 30, ~~2021 were as follows:~~2022 were:


		March 31, 2022											December 31, 2022
				Fair Value											Fair Value
(Dollars in thousands)	(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:											Financial assets:
Cash and cash equivalents	Cash and cash equivalents	$	1,249,314	$	1,249,314	$	—	$	—	$	1,249,314	Cash and cash equivalents	$	1,952,513	$	1,952,513	$	—	$	—	$	1,952,513
Securities — trading		366		—		366		—		366
Securities — available-for-sale		229,510		—		78,031		151,479		229,510
Securities—trading												Securities—trading	372		—		372		—		372
Securities—available-for-sale												Securities—available-for-sale	248,062		—		72,939		175,123		248,062

Loans held for sale, at fair value	Loans held for sale, at fair value	19,611		—		19,611		—		19,611		Loans held for sale, at fair value	4,292		—		4,292		—		4,292
Loans held for sale, at lower of cost or fair value	Loans held for sale, at lower of cost or fair value	11,182		—		—		11,255		11,255		Loans held for sale, at lower of cost or fair value	455		—		—		456		456
Loans held for investment—net	Loans held for investment—net	13,093,603		—		—		13,149,215		13,149,215		Loans held for investment—net	15,473,212		—		—		15,171,361		15,171,361
Securities borrowed	Securities borrowed	274,644		—		—		263,274		263,274		Securities borrowed	58,846		—		—		60,217		60,217
Customer, broker-dealer and clearing receivables	Customer, broker-dealer and clearing receivables	510,561		—		—		502,086		502,086		Customer, broker-dealer and clearing receivables	272,579		—		—		281,165		281,165

Mortgage servicing rights	Mortgage servicing rights	23,519		—		—		23,519		23,519		Mortgage servicing rights	25,526		—		—		25,526		25,526
Financial liabilities:	Financial liabilities:											Financial liabilities:
Total deposits	Total deposits	12,733,002		—		11,750,900		—		11,750,900		Total deposits	15,690,494		—		14,334,437		—		14,334,437

Advances from the Federal Home Loan Bank	Advances from the Federal Home Loan Bank	152,500		—		151,017		—		151,017		Advances from the Federal Home Loan Bank	100,000		—		92,471		—		92,471
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	381,682		—		358,541		—		358,541		Borrowings, subordinated notes and debentures	334,077		—		297,252		—		297,252
Securities loaned	Securities loaned	447,748		—		—		449,181		449,181		Securities loaned	156,008		—		—		156,039		156,039
Customer, broker-dealer and clearing payables	Customer, broker-dealer and clearing payables	543,905		—		—		532,854		532,854		Customer, broker-dealer and clearing payables	420,947		—		—		420,946		420,946

June 30, 2021
Fair Value
(Dollars in thousands) Carrying
Amount Level 1 Level 2 Level 3 Total Fair Value
Financial assets:
Cash and cash equivalents $ 1,037,777 $ 1,037,777 $ — $ — $ 1,037,777
Securities — trading 1,983 — 1,983 — 1,983
Securities — available-for-sale 187,335 — 119,720 67,615 187,335
Loans held for sale, at fair value 29,768 — 29,768 — 29,768
Loans held for sale, at lower of cost or fair value 12,294 — — 12,336 12,336
Loans held for investment—net 11,414,814 — — 11,833,102 11,833,102
Securities borrowed 619,088 — — 619,274 619,274
Customer, broker-dealer and clearing receivables 369,815 — — 369,815 369,815
Mortgage servicing rights 17,911 — — 17,911 17,911
Financial liabilities:
Total deposits 10,815,797 — 10,297,450 — 10,297,450
Advances from the Federal Home Loan Bank 353,500 — 353,500 — 353,500
Borrowings, subordinated notes and debentures 221,358 — 210,196 — 210,196
Securities loaned 728,988 — — 731,467 731,467
Customer, broker-dealer and clearing payables 535,425 — — 535,425 535,425

~~Table of Contents~~


	June 30, 2022
			Fair Value
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:
Cash and cash equivalents	$	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

~~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 or deposits that reprice frequently and fully. For fixed rate loans, deposits, borrowings or subordinated debt and for variable rate loans, 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 in Note 3 – “Fair Value” of ~~our~~the 2022 Form ~~10-K for the year ended June 30, 2021.~~10-K. The carrying amount of stock of regulatory agencies approximates the estimated fair value of ~~this investment.~~these investments. The fair value of off-balance sheet items is not ~~considered~~ material.

Table of Contents

4. SECURITIES

The amortized cost, carrying amount and fair value for the trading and available-for-sale securities at ~~March~~December 31, 2022 and June 30, ~~2021~~2022 were:


		March 31, 2022										December 31, 2022
		Trading		Available-for-sale									Trading	Available-for-sale
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value					(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (MBS):	Mortgage-backed securities (MBS):														Mortgage-backed securities (MBS):
U.S. agencies1	U.S. agencies1	$	—	$	28,853	$	43	$	(1,693)	$	27,203				U.S. agencies1	$	—	$	26,008	$	1	$	(3,213)	$	22,796
Non-agency2	Non-agency2	—		151,517		1,423		(1,461)		151,479					Non-agency2	—		180,541		750		(6,168)		175,123
Total mortgage-backed securities	Total mortgage-backed securities	—		180,370		1,466		(3,154)		178,682					Total mortgage-backed securities	—		206,549		751		(9,381)		197,919
Non-MBS:	Non-MBS:														Non-MBS:

Municipal	Municipal	366		3,498		—		(187)		3,311					Municipal	372		3,592		—		(265)		3,327
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		46,993		524		—		47,517					Asset-backed securities and structured notes	—		47,000		—		(184)		46,816
Total Non-MBS	Total Non-MBS	366		50,491		524		(187)		50,828					Total Non-MBS	372		50,592		—		(449)		50,143
Total debt securities	Total debt securities	$	366	$	230,861	$	1,990	$	(3,341)	$	229,510				Total debt securities	$	372	$	257,141	$	751	$	(9,830)	$	248,062

		June 30, 2021										June 30, 2022
		Trading		Available-for-sale									Trading	Available-for-sale
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value					(Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (MBS):	Mortgage-backed securities (MBS):														Mortgage-backed securities (MBS):
U.S. agencies1	U.S. agencies1	$	—	$	23,639	$	420	$	(146)	$	23,913				U.S. agencies1	$	—	$	27,722	$	9	$	(2,406)	$	25,325
Non-agency2	Non-agency2	—		65,174		2,862		(421)		67,615					Non-agency2	—		187,616		1,832		(2,634)		186,814
Total mortgage-backed securities	Total mortgage-backed securities	—		88,813		3,282		(567)		91,528					Total mortgage-backed securities	—		215,338		1,841		(5,040)		212,139
Non-MBS:	Non-MBS:														Non-MBS:

Municipal	Municipal	1,983		3,466		99		—		3,565					Municipal	1,758		3,529		—		(281)		3,248
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		90,549		1,693		—		92,242					Asset-backed securities and structured notes	—		47,000		131		—		47,131
Total Non-MBS	Total Non-MBS	1,983		94,015		1,792		—		95,807					Total Non-MBS	1,758		50,529		131		(281)		50,379
Total debt securities	Total debt securities	$	1,983	$	182,828	$	5,074	$	(567)	$	187,335				Total debt securities	$	1,758	$	265,867	$	1,972	$	(5,321)	$	262,518

1Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac.

No credit losses were recognized on available-for-sale securities in the three and six months ended December 31, 2022 and December 30, 2021. No allowance for credit losses for available-for-sale debt securities was recorded at December 31, 2022 and June 30, 2022 based on an analysis of: (1) the credit characteristics of the securities, including the forecasted cash flows, credit ratings, credit enhancement, and any external government backing, and (2) whether the Company is intending to sell or is required to sell any securities before recovering the amortized cost basis of the securities.

The Company’s non-agency MBS available-for-sale portfolio, with a total fair value of ~~$151,479~~$175,123 at ~~March~~December 31, 2022, consists of 1617 different issues of super senior securities.

The face amounts of debt securities available-for-sale ~~that were~~ pledged to secure borrowings at ~~March~~December 31, 2022 and June 30, ~~2021~~2022 were ~~$1.2~~$1.1 million and ~~$1.4~~$1.2 million, respectively.

1615

Table of Contents

~~The securities~~Securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position ~~were as follows:~~were:


		March 31, 2022												December 31, 2022
		Available-for-sale securities in loss position for													Available-for-sale securities in loss position for
		Less Than 12 Months				More Than 12 Months				Total						Less Than 12 Months	More Than 12 Months				Total
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses						(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
MBS:	MBS:																	MBS:
U.S. agencies	U.S. agencies	$	19,641	$	(1,192)	$	5,167	$	(501)	$	24,808	$	(1,693)					U.S. agencies	$	6,786	$	(470)	$	15,832	$	(2,743)	$	22,618	$	(3,213)
Non-agency	Non-agency	43,916		(1,085)		5,040		(376)		48,956		(1,461)						Non-agency	126,507		(5,705)		4,399		(463)		130,906		(6,168)
Total MBS	Total MBS	63,557		(2,277)		10,207		(877)		73,764		(3,154)						Total MBS	133,293		(6,175)		20,231		(3,206)		153,524		(9,381)
Non-MBS:	Non-MBS:																	Non-MBS:

Municipal debt	Municipal debt	3,311		(187)		—		—		3,311		(187)						Municipal debt	3,327		(265)		—		—		3,327		(265)
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		—		—		—		—		—						Asset-backed securities and structured notes	46,816		(184)		—		—		46,816		(184)
Total Non-MBS	Total Non-MBS	3,311		(187)		—		—		3,311		(187)						Total Non-MBS	50,143		(449)		—		—		50,143		(449)
Total debt securities	Total debt securities	$	66,868	$	(2,464)	$	10,207	$	(877)	$	77,075	$	(3,341)					Total debt securities	$	183,436	$	(6,624)	$	20,231	$	(3,206)	$	203,667	$	(9,830)

		June 30, 2021												June 30, 2022
		Available-for-sale securities in loss position for													Available-for-sale securities in loss position for
		Less Than 12 Months				More Than 12 Months				Total						Less Than 12 Months	More Than 12 Months				Total
(Dollars in thousands)	(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses						(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
MBS:	MBS:																	MBS:
U.S. agencies	U.S. agencies	$	10,001	$	(146)	$	—	$	—	$	10,001	$	(146)					U.S. agencies	$	16,446	$	(1,338)	$	8,097	$	(1,068)	$	24,543	$	(2,406)
Non-agency	Non-agency	—		—		6,018		(421)		6,018		(421)						Non-agency	92,796		(2,204)		4,751		(430)		97,547		(2,634)
Total MBS	Total MBS	10,001		(146)		6,018		(421)		16,019		(567)						Total MBS	109,242		(3,542)		12,848		(1,498)		122,090		(5,040)
Non-MBS:	Non-MBS:																	Non-MBS:

Municipal debt	Municipal debt	—		—		—		—		—		—						Municipal debt	3,248		(281)		—		—		3,248		(281)
Asset-backed securities and structured notes	Asset-backed securities and structured notes	—		—		—		—		—		—						Asset-backed securities and structured notes	—		—		—		—		—		—
Total Non-MBS	Total Non-MBS	—		—		—		—		—		—						Total Non-MBS	3,248		(281)		—		—		3,248		(281)
Total debt securities	Total debt securities	$	10,001	$	(146)	$	6,018	$	(421)	$	16,019	$	(567)					Total debt securities	$	112,490	$	(3,823)	$	12,848	$	(1,498)	$	125,338	$	(5,321)

On ~~March~~December 31, 2022, there were 12nineteen securities in a continuous loss position for a period of more than 12 months, and 18thirty-five securities in a continuous loss position for a period of less than 12 months. At June 30, ~~2021,~~2022, there were 7fourteen securities in a continuous loss position for a period of more than 12 months, and 7twenty-five securities in a continuous loss position for a period of less than 12 months.

At ~~March~~December 31, 2022, 1one non-agency ~~RMBS~~MBS with a total carrying amount of ~~$2.4~~$1.4 million was determined to have cumulative credit losses of $0.8 million of which none was recognized in earnings during the three months ended ~~March~~December 31, 2022.

During the ~~nine~~six months ended ~~March 31, 2021, the company sold no available-for-sale securities. During the nine months ended March~~December 31, 2022 the ~~company~~Company sold no available-for-sale securities.

The ~~Company had recorded unrealized gains and unrealized losses in~~components of the Company’s accumulated other comprehensive ~~loss as follows:~~income (loss) are:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2022		June 30, 2021		(Dollars in thousands)	December 31, 2022		June 30, 2022
Available-for-sale debt securities—net unrealized gains (losses)	Available-for-sale debt securities—net unrealized gains (losses)	$	(1,351)	$	4,507	Available-for-sale debt securities—net unrealized gains (losses)	$	(9,079)	$	(3,349)
Available-for-sale debt securities—non-credit related losses	Available-for-sale debt securities—non-credit related losses	(845)		(845)		Available-for-sale debt securities—non-credit related losses	(845)		(845)

Subtotal	Subtotal	(2,196)		3,662		Subtotal	(9,924)		(4,194)
Tax benefit (expense)	Tax benefit (expense)	570		(1,155)		Tax benefit (expense)	2,979		1,261
Net unrealized gain (loss) on investment securities in accumulated other comprehensive income (loss)	Net unrealized gain (loss) on investment securities in accumulated other comprehensive income (loss)	$	(1,626)	$	2,507	Net unrealized gain (loss) on investment securities in accumulated other comprehensive income (loss)	$	(6,945)	$	(2,933)

1716

Table of Contents

The following table sets forth the expected maturity distribution of our mortgage-backed securities and the contractual maturity distribution of our Non-RMBS securities and the weighted-average yield for each range of maturities:


	At December 31, 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
(Dollars in thousands)	Amount		Yield1		Amount		Yield1		Amount		Yield1		Amount		Yield1		Amount		Yield1
Available-for-sale
Mortgage-backed securities:
Agency2	$	26,008	1.80	%	$	4,969	1.88	%	$	12,531	1.83	%	$	6,650	1.81	%	$	1,858	1.41	%
Non-Agency3	180,541		5.18	%	867		6.12	%	176,931		5.13	%	1,912		6.56	%	831		11.67	%
Total Mortgage-Backed Securities	$	206,549	4.76	%	$	5,836	2.51	%	$	189,462	4.91	%	$	8,562	2.87	%	$	2,689	4.58	%
Non-RMBS

Municipal	3,592		3.57	%	—		—	%	—		—	%	—		—	%	3,592		3.57	%
Asset-backed securities and structured notes	47,000		9.16	%	41,249		9.16	%	5,751		9.16	%	—		—	%	—		—	%
Total Non-RMBS	$	50,592	8.77	%	$	41,249	9.16	%	$	5,751	9.16	%	$	—	—	%	$	3,592	3.57	%
Available-for-sale—Amortized Cost	$	257,141	5.54	%	$	47,085	8.34	%	$	195,213	5.04	%	$	8,562	2.87	%	$	6,281	4.00	%
Available-for-sale—Fair Value	$	248,062	5.56	%	$	46,358	8.34	%	$	188,044	5.04	%	$	7,674	2.87	%	$	5,986	4.00	%














Total available-for-sale securities	$	248,062	5.56	%	$	46,358	8.34	%	$	188,044	5.04	%	$	7,674	2.87	%	$	5,986	4.00	%

1 Weighted-average yield is based on amortized cost of the securities. Residential mortgage-backed security yields and maturities include impact of expected prepayments and other timing factors such as interest rate forward curve.

2 Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac.

3Private sponsors of securities collateralized primarily by pools of 1-4 family residential first mo prime, Alt-A or pay-option ARM mortgages.

Table of Contents

5. LOANS & ALLOWANCE FOR CREDIT LOSSES

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


(Dollars in thousands)	(Dollars in thousands)	March 31, 2022		June 30, 2021		(Dollars in thousands)	December 31, 2022		June 30, 2022
Single Family - Mortgage & Warehouse	Single Family - Mortgage & Warehouse	$	3,972,103	$	4,359,472	Single Family - Mortgage & Warehouse	$	3,988,955	$	3,988,462
Multifamily and Commercial Mortgage	Multifamily and Commercial Mortgage	2,662,517		2,470,454		Multifamily and Commercial Mortgage	3,050,128		2,877,680
Commercial Real Estate	Commercial Real Estate	4,293,032		3,180,453		Commercial Real Estate	5,762,049		4,781,044
Commercial & Industrial - Non-RE	Commercial & Industrial - Non-RE	1,780,545		1,123,869		Commercial & Industrial - Non-RE	2,208,945		2,028,128
Auto & Consumer	Auto & Consumer	521,936		362,180		Auto & Consumer	632,183		567,228
Other	Other	16,125		58,316		Other	7,234		11,134
Total gross loans		13,246,258		11,554,744
Total gross loans and leases						Total gross loans and leases	15,649,494		14,253,676
Allowance for credit losses - loans	Allowance for credit losses - loans	(143,372)		(132,958)		Allowance for credit losses - loans	(157,218)		(148,617)
Unaccreted premiums (discounts) and loan fees		(9,283)		(6,972)
Total net loans		$	13,093,603	$	11,414,814
Unaccreted premiums (discounts) and loan and lease fees						Unaccreted premiums (discounts) and loan and lease fees	(19,064)		(13,998)
Total net loans and leases						Total net loans and leases	$	15,473,212	$	14,091,061

~~The following tables summarize activity~~Activity in the allowance for credit losses ~~- loans~~ by portfolio classes for the periods ~~indicated.~~was:


		For the Three Months Ended March 31, 2022															For the Three Months Ended December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total		(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at January 1, 2022		$	25,580	$	13,628	$	67,581	$	22,716	$	10,921	$	63	$	140,489
Balance at October 1, 2022																Balance at October 1, 2022	$	18,039	$	14,649	$	73,776	$	34,383	$	14,595	$	30	$	155,472

Provision (benefit) for credit losses - loans	Provision (benefit) for credit losses - loans	(3,797)		190		2,248		3,525		2,352		(18)		4,500		Provision (benefit) for credit losses - loans	1,878		808		(1,608)		1,655		776		(9)		3,500

Charge-offs	Charge-offs	—		—		—		—		(1,892)		—		(1,892)		Charge-offs	(294)		—		—		—		(1,871)		—		(2,165)
Recoveries	Recoveries	6		—		—		27		242		—		275		Recoveries	8		—		—		—		403		—		411
Balance at March 31, 2022		$	21,789	$	13,818	$	69,829	$	26,268	$	11,623	$	45	$	143,372
Balance at December 31, 2022																Balance at December 31, 2022	$	19,631	$	15,457	$	72,168	$	36,038	$	13,903	$	21	$	157,218


		For the Three Months Ended March 31, 2021															For the Three Months Ended December 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total		(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Balance at January 1, 2021		$	32,727	$	12,889	$	56,715	$	19,129	$	7,413	$	7,520	$	136,393
Provision for credit losses - loans		(2,785)		704		(133)		4,506		317		91		2,700
Balance at October 1, 2021																Balance at October 1, 2021	$	25,329	$	13,359	$	65,223	$	22,519	$	10,007	$	341	$	136,778

Provision (benefit) for credit losses - loans																Provision (benefit) for credit losses - loans	182		269		2,358		170		1,299		(278)		4,000
Charge-offs	Charge-offs	(110)		(177)		(255)		—		(863)		—		(1,405)		Charge-offs	—		—		—		—		(640)		—		(640)
Recoveries	Recoveries	83		—		—		18		318		—		419		Recoveries	69		—		—		27		255		—		351
Balance at March 31, 2021		$	29,915	$	13,416	$	56,327	$	23,653	$	7,185	$	7,611	$	138,107
Balance at December 31, 2021																Balance at December 31, 2021	$	25,580	$	13,628	$	67,581	$	22,716	$	10,921	$	63	$	140,489


		For the Nine Months Ended March 31, 2022															For the Six Months Ended December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total		(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
Balance at July 1, 2022																Balance at July 1, 2022	$	19,670	$	14,655	$	69,339	$	30,808	$	14,114	$	31	$	148,617

Provision (benefit) for credit losses - loans	Provision (benefit) for credit losses - loans	(4,966)		495		11,901		(1,951)		7,277		(256)		12,500		Provision (benefit) for credit losses - loans	236		802		2,829		5,212		3,181		(10)		12,250

Charge-offs	Charge-offs	0		—		—		(322)		(2,926)		—		(3,248)		Charge-offs	(298)		—		—		—		(4,233)		—		(4,531)
Recoveries	Recoveries	151		177		—		81		753		—		1,162		Recoveries	23		—		—		18		841		—		882
Balance at March 31, 2022		$	21,789	$	13,818	$	69,829	$	26,268	$	11,623	$	45	$	143,372
Balance at December 31, 2022																Balance at December 31, 2022	$	19,631	$	15,457	$	72,168	$	36,038	$	13,903	$	21	$	157,218

For the Nine Months Ended March 31, 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 $ 25,901 $ 4,718 $ 21,052 $ 9,954 $ 9,461 $ 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 47 1,467 9,637 9,472 (984) 2,861 22,500
Charge-offs (2,469) (177) (255) (2,833) (2,819) — (8,553)
Recoveries 118 — — 18 917 — 1,053
Balance at March 31, 2021 $ 29,915 $ 13,416 $ 56,327 $ 23,653 $ 7,185 $ 7,611 $ 138,107


	For the Six Months Ended December 31, 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, 2021	$	26,604	$	13,146	$	57,928	$	28,460	$	6,519	$	301	$	132,958

Provision (benefit) for credit losses - loans	(1,169)		305		9,653		(5,476)		4,925		(238)		8,000
Charge-offs	—		—		—		(322)		(1,034)		—		(1,356)
Recoveries	145		177		—		54		511		—		887
Balance at December 31, 2021	$	25,580	$	13,628	$	67,581	$	22,716	$	10,921	$	63	$	140,489

Table of Contents

Credit Quality Disclosures. Nonaccrual loans consisted of the following as of the dates indicated:

As of March 31, 2022
(Dollars in thousands) With Allowance With No Allowance Total
Single Family - Mortgage & Warehouse $ 52,017 $ 61,300 $ 113,317
Multifamily and Commercial Mortgage 2,941 6,727 9,668
Commercial Real Estate — 14,952 14,952
Commercial & Industrial - Non-RE — — —
Auto & Consumer 62 383 445
Other — 372 372
Total nonaccrual loans $ 55,020 $ 83,734 $ 138,754
Nonaccrual loans to total loans 1.05 %



(Dollars in thousands)	As of December 31, 2022
Single Family - Mortgage & Warehouse	$	39,043
Multifamily and Commercial Mortgage	35,275
Commercial Real Estate	14,852
Commercial & Industrial - Non-RE	2,989
Auto & Consumer	1,447
Other	1,382
Total nonaccrual loans	$	94,988
Nonaccrual loans to total loans	0.61		%



(Dollars in thousands)	As of June 30, 2022
Single Family - Mortgage & Warehouse	$	66,424
Multifamily and Commercial Mortgage	33,410
Commercial Real Estate	14,852
Commercial & Industrial - Non-RE	2,989
Auto & Consumer	439
Other	80
Total nonaccrual loans	$	118,194
Nonaccrual loans to total loans	0.83		%

No interest income was recognized on nonaccrual loans in ~~either~~ the three and six months ended ~~March~~December 31, 2022 ~~or March~~and three and six months ended December 31, 2021. ~~No interest income was recognized on~~There were no nonaccrual loans ~~in either the nine months ended March~~without an allowance for credit losses as of December 31, 2022 ~~or March 31, 2021.~~and June 30, 2022.

Approximately ~~0.53%~~1.39% of our nonaccrual loans at ~~March~~December 31, 2022 were considered ~~TDRs,~~troubled debt restructurings (“TDRs”), compared to ~~0.55%~~1.18% at June 30, ~~2021.~~2022. Borrowers that 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 category to the performing loan category and any previously deferred interest income is recognized. ~~Approximately 81.67%~~Approximately 41.10% of the ~~Bank’s~~Company’s nonaccrual loans are single family first ~~mortgages.~~mortgages as of December 31, 2022.

The ~~following tables present the~~ outstanding unpaid balance of loans that are either performing ~~and~~or nonaccrual by portfolio ~~class:~~class was:


		March 31, 2022															December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		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	Performing	$	3,858,786	$	2,652,850	$	4,278,080	$	1,780,545	$	521,490	$	15,753	$	13,107,504	Performing	$	3,949,912	$	3,014,853	$	5,747,197	$	2,205,956	$	630,736	$	5,852	$	15,554,506
Nonaccrual	Nonaccrual	113,317		9,667		14,952		—		446		372		138,754		Nonaccrual	39,043		35,275		14,852		2,989		1,447		1,382		94,988
Total	Total	$	3,972,103	$	2,662,517	$	4,293,032	$	1,780,545	$	521,936	$	16,125	$	13,246,258	Total	$	3,988,955	$	3,050,128	$	5,762,049	$	2,208,945	$	632,183	$	7,234	$	15,649,494

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
Performing $ 4,253,764 $ 2,450,026 $ 3,164,614 $ 1,120,927 $ 361,902 $ 58,316 $ 11,409,549
Nonaccrual 105,708 20,428 15,839 2,942 278 — 145,195
Total $ 4,359,472 $ 2,470,454 $ 3,180,453 $ 1,123,869 $ 362,180 $ 58,316 $ 11,554,744


	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

From time to time the Company modifies loan terms temporarily for borrowers who are experiencing financial stress. These loans are performing and accruing and ~~will~~ generally return to the original loan terms after the modification term expires. The Company had no TDRs classified as performing loans at ~~March~~December 31, 2022 or June 30, ~~2021.~~

2022.

Table of Contents

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends. The Company analyzes loans individually by classifying the loans based on credit risk. The Company uses the following definitions for risk ratings.

Pass. Loans classified as pass are well protected by the current net worth and paying capacity of the obligor or by the fair value of any underlying collateral, less cost to acquire and sell in a timely manner.

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The Company reviews and grades loans following a continuous review process, featuring coverage of all loan types and business lines at least quarterly. Continuous reviewing provides more effective risk monitoring because it immediately tests for potential impacts caused by changes in personnel, policy, products or underwriting standards.

Table of Contents

The amortized cost basis of the Company’s loans by fiscal year of origination and credit quality indicator ~~of the Company’s loan as of March 31, 2022 was as follows:~~are:


																															December 31, 2022
		Loans Held for Investment Origination Year																		Revolving Loans							Total				Loans Held for Investment Origination Year																							Revolving Loans				Total
(Dollars in thousands)	(Dollars in thousands)	2022			2021			2020			2019			2018			Prior						Total	(Dollars in thousands)	2023	2022						2021				2020				2019				Prior				Revolving Loans					Total
Single Family-Mortgage & Warehouse	Single Family-Mortgage & Warehouse																															Single Family-Mortgage & Warehouse
Pass	Pass	$	1,031,670		$	636,313		$	477,841		$	339,895		$	308,360		$	609,187		$	422,833								$	3,826,099	Pass		$	464,448			$	1,386,160			$	555,289			$	363,250			$	264,688		$			718,860	$	143,354		$	3,896,049
Special Mention	Special Mention	—			—			5,625			2,515			5,470			13,111			—							26,721			Special Mention	—				4,104				956				11,610				14,042				21,554			663				52,929
Substandard	Substandard	—			1,181			34,805			19,253			14,723			49,321			—							119,283			Substandard	—				549				1,005				3,975				5,335				29,113			—				39,977
Doubtful	Doubtful	—			—			—			—			—			—			—							—			Doubtful	—				—				—				—				—				—			—				—
Total	Total	1,031,670			637,494			518,271			361,663			328,553			671,619			422,833							3,972,103			Total	464,448				1,390,813				557,250				378,835				284,065				769,527			144,017				3,988,955
Multifamily and Commercial Mortgage	Multifamily and Commercial Mortgage																													Multifamily and Commercial Mortgage
Pass	Pass	622,539			584,536			465,708			302,877			236,822			365,615			—							2,578,097			Pass	357,936				982,288				519,340				395,827				238,903				454,957			—				2,949,251
Special Mention	Special Mention	—			—			1,462			—			667			1,391			—							3,520			Special Mention	—				9,704				5,935				1,973				3,259				—			—				20,871
Substandard	Substandard	—			5,814			34,780			9,566			12,601			18,139			—							80,900			Substandard	—				3,145				5,737				31,458				7,450				32,216			—				80,006
Doubtful	Doubtful	—			—			—			—			—			—			—							—			Doubtful	—				—				—				—				—				—			—				—
Total	Total	622,539			590,350			501,950			312,443			250,090			385,145			—							2,662,517			Total	357,936				995,137				531,012				429,258				249,612				487,173			—				3,050,128
Commercial Real Estate	Commercial Real Estate																													Commercial Real Estate
Pass	Pass	1,707,928			1,070,879			469,277			298,783			39,156			—			511,527							4,097,550			Pass	901,296				2,669,607				844,296				179,916				118,000				4,000			885,282				5,602,397
Special Mention	Special Mention	—			—			12,138			16,628			15,000			—			—							43,766			Special Mention	—				—				31,573				10,818				950				15,000			—				58,341
Substandard	Substandard	—			—			88,337			16,380			45,701			—			1,298							151,716			Substandard	—				17,950				51,724				—				15,487				14,852			1,298				101,311
Doubtful	Doubtful	—			—			—			—			—			—			—							—			Doubtful	—				—				—				—				—				—			—				—
Total	Total	1,707,928			1,070,879			569,752			331,791			99,857			—			512,825							4,293,032			Total	901,296				2,687,557				927,593				190,734				134,437				33,852			886,580				5,762,049
Commercial & Industrial - Non-RE	Commercial & Industrial - Non-RE																													Commercial & Industrial - Non-RE
Pass	Pass	269,404			35,182			76,610			13,316			12,641			152			1,331,399							1,738,704			Pass	149,777				373,451				34,549				17,809				3,879				504			1,609,675				2,189,644
Special Mention	Special Mention	—			—			—			206			810			—			28,037							29,053			Special Mention	—				8,474				—				—				—				—			—				8,474
Substandard	Substandard	2,988			—			9,800			—			—			—			—							12,788			Substandard	—				2,989				—				7,838				—				—			—				10,827
Doubtful	Doubtful	—			—			—			—			—			—			—							—			Doubtful	—				—				—				—				—				—			—				—
Total	Total	272,392			35,182			86,410			13,522			13,451			152			1,359,436							1,780,545			Total	149,777				384,914				34,549				25,647				3,879				504			1,609,675				2,208,945
Auto & Consumer	Auto & Consumer																													Auto & Consumer
Pass	Pass	274,134			121,317			50,315			43,816			19,404			11,532			—							520,518			Pass	162,687				303,542				86,643				32,849				27,563				16,124			—				629,408
Special Mention	Special Mention	49			345			85			7			19			35			—							540			Special Mention	27				695				289				43				18				64			—				1,136
Substandard	Substandard	213			121			211			255			62			16			—							878			Substandard	90				841				307				154				226				21			—				1,639
Doubtful	Doubtful	—			—			—			—			—			—			—							—			Doubtful	—				—				—				—				—				—			—				—
Total	Total	274,396			121,783			50,611			44,078			19,485			11,583			—							521,936			Total	162,804				305,078				87,239				33,046				27,807				16,209			—				632,183
Other	Other																													Other
Pass	Pass	2,621			10,253			617			—			1,179			1,028			—							15,698			Pass	513				2,000				1,669				—				—				1,402			—				5,584
Special Mention	Special Mention	—			—			21			—			—			34			—							55			Special Mention	—				—				268				—				—				—			—				268
Substandard	Substandard	—			—			55			—			317			—			—							372			Substandard	—				—				1,205				—				—				177			—				1,382
Doubtful	Doubtful	—			—			—			—			—			—			—							—			Doubtful	—				—				—				—				—				—			—				—
Total	Total	2,621			10,253			693			—			1,496			1,062			—							16,125			Total	513				2,000				3,142				—				—				1,579			—				7,234
Total	Total																													Total
Pass	Pass	3,908,296			2,458,480			1,540,368			998,687			617,562			987,514			2,265,759							12,776,666			Pass	2,036,657				5,717,048				2,041,786				989,651				653,033				1,195,847			2,638,311				15,272,333
Special Mention	Special Mention	49			345			19,331			19,356			21,966			14,571			28,037							103,655			Special Mention	27				22,977				39,021				24,444				18,269				36,618			663				142,019
Substandard	Substandard	3,201			7,116			167,988			45,454			73,404			67,476			1,298							365,937			Substandard	90				25,474				59,978				43,425				28,498				76,379			1,298				235,142
Doubtful	Doubtful	—			—			—			—			—			—			—							—			Doubtful	—				—				—				—				—				—			—				—
Total	Total	$	3,911,546		$	2,465,941		$	1,727,687		$	1,063,497		$	712,932		$	1,069,561		$	2,295,094						$	13,246,258		Total	$2,036,774				$5,765,499				$2,140,785				$1,057,520				$699,800				$1,308,844			$2,640,272				$15,649,494
As a % of total gross loans	As a % of total gross loans	29.54		%	18.62		%	13.04		%	8.03		%	5.38		%	8.07		%	17.33		%					100.0		%	As a % of total gross loans	13.02%				36.84%				13.68%				6.76%				4.47%				8.36%			16.87%				100.0%

Table of Contents


	June 30, 2022
	Loans Held for Investment Origination Year												Revolving Loans		Total
(Dollars in thousands)	2022		2021		2020		2019		2018		Prior
Single Family-Mortgage & Warehouse
Pass	$	1,484,027	$	600,054	$	402,712	$	303,999	$	279,248	$	548,703	$	241,925	$	3,860,668
Special Mention	—		—		4,790		2,505		4,125		10,971		38,637		61,028
Substandard	—		2,288		3,928		18,407		5,955		36,188		—		66,766
Doubtful	—		—		—		—		—		—		—		—
Total	1,484,027		602,342		411,430		324,911		289,328		595,862		280,562		3,988,462
Multifamily and Commercial Mortgage
Pass	999,819		569,486		429,247		259,161		219,548		316,013		—		2,793,274
Special Mention	1,200		—		534		539		—		968		—		3,241
Substandard	—		5,772		34,343		9,613		7,308		24,129		—		81,165
Doubtful	—		—		—		—		—		—		—		—
Total	1,001,019		575,258		464,124		269,313		226,856		341,110		—		2,877,680
Commercial Real Estate
Pass	2,482,366		990,887		358,422		186,800		28,758		—		602,412		4,649,645
Special Mention	—		32,351		12,138		16,487		15,000		—		—		75,976
Substandard	—		—		12,575		18,043		23,507		—		1,298		55,423
Doubtful	—		—		—		—		—		—		—		—
Total	2,482,366		1,023,238		383,135		221,330		67,265		—		603,710		4,781,044
Commercial & Industrial - Non-RE
Pass	435,228		66,226		25,629		61,932		9,268		—		1,388,435		1,986,718
Special Mention	13		—		—		186		710		—		—		909
Substandard	2,988		28,359		9,154		—		—		—		—		40,501
Doubtful	—		—		—		—		—		—		—		—
Total	438,229		94,585		34,783		62,118		9,978		—		1,388,435		2,028,128
Auto & Consumer
Pass	352,468		107,882		43,377		37,008		16,147		8,891		—		565,773
Special Mention	204		188		24		110		—		1		—		527
Substandard	157		311		224		205		25		6		—		928
Doubtful	—		—		—		—		—		—		—		—
Total	352,829		108,381		43,625		37,323		16,172		8,898		—		567,228
Other
Pass	3,057		6,185		—		—		1,091		721		—		11,054
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		46		—		—		34		—		80
Doubtful	—		—		—		—		—		—		—		—
Total	3,057		6,185		46		—		1,091		755		—		11,134
Total
Pass	5,756,965		2,340,720		1,259,387		848,900		554,060		874,328		2,232,772		13,867,132
Special Mention	1,417		32,539		17,486		19,827		19,835		11,940		38,637		141,681
Substandard	3,145		36,730		60,270		46,268		36,795		60,357		1,298		244,863
Doubtful	—		—		—		—		—		—		—		—
Total	$	5,761,527	$	2,409,989	$	1,337,143	$	914,995	$	610,690	$	946,625	$	2,272,707	$	14,253,676
As a % of total gross loans	40.42%		16.91%		9.38%		6.42%		4.28%		6.64%		15.95%		100.0%

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses ~~- loans. The Company also~~and evaluates credit quality based on the aging status of its loans. ~~During the year, the Company holds certain~~Certain short-term loans ~~that~~ do not have a fixed maturity date ~~that~~and are treated as delinquent if not paid in full 90 days after the origination date.

The Company took proactive measures to manage loans that became delinquent during the recent economic downturn as a result of the COVID-19 pandemic. As of March 31, 2022, no loans were on forbearance status for forbearance granted out of COVID-19. Any forbearance granted out of COVID-19 was for six months or less.

2022

Table of Contents

The ~~following tables provide the~~ outstanding unpaid balance of loans ~~that are~~ past due 30 days or more by portfolio class are:


	December 31, 2022
(Dollars in thousands)	30-59 Days Past Due			60-89 Days Past Due			90+ Days Past Due			Total
Single Family-Mortgage & Warehouse	$	20,731		$	9,432		$	37,421		$	67,584
Multifamily and Commercial Mortgage	4,860			8,229			29,548			42,637
Commercial Real Estate	—			—			14,852			14,852

Auto & Consumer	5,353			1,278			821			7,452
Other	2,000			1,017			177			3,194
Total	$	32,944		$	19,956		$	82,819		$	135,719
As a % of total gross loans	0.21		%	0.13		%	0.53		%	0.87		%


	June 30, 2022
(Dollars in thousands)	30-59 Days Past Due			60-89 Days Past Due			90+ Days Past Due			Total
Single Family-Mortgage & Warehouse	$	5,167		$	1,518		$	63,286		$	69,971
Multifamily and Commercial Mortgage	9,455			2,115			26,556			38,126
Commercial Real Estate	—			14,852			—			14,852

Auto & Consumer	4,865			1,009			466			6,340
Other	413			—			193			606
Total	$	19,900		$	19,494		$	90,501		$	129,895
As a % of total gross loans	0.14		%	0.14		%	0.63		%	0.91		%

Loans reaching 90+ days past due are placed on non-accrual as required under Company policy. No loans 90+ days past due were still accruing interest as of December 31, 2022 and June 30, 2022.

Loans in process of foreclosure were $23.6 million and $20.7 million as of ~~the dates indicated:~~December 31, 2022 and June 30, 2022, respectively.

March 31, 2022
(Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Total
Single Family-Mortgage & Warehouse $ 19,537 $ 8,579 $ 110,099 $ 138,215
Multifamily and Commercial Mortgage 8,703 10,254 3,667 22,624
Commercial Real Estate — 58,205 1,141 59,346
Commercial & Industrial - Non-RE — 80 — 80
Auto & Consumer 3,558 1,158 406 5,122
Other 147 55 363 565
Total $ 31,945 $ 78,331 $ 115,676 $ 225,952
As a % of total gross loans 0.24 % 0.59 % 0.87 % 1.71 %

June 30, 2021
(Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Total
Single Family-Mortgage & Warehouse $ 24,150 $ 46,552 $ 69,169 $ 139,871
Multifamily and Commercial Mortgage 7,991 1,816 12,122 21,929
Commercial Real Estate 36,786 — — 36,786
Commercial & Industrial - Non-RE — — 2,960 2,960
Auto & Consumer 601 306 235 1,142
Other — — — —
Total $ 69,528 $ 48,674 $ 84,486 $ 202,688
As a % of total gross loans and leases 0.60 % 0.42 % 0.73 % 1.75 %
Unfunded Loan Commitment Reserves

~~Allowance for Credit Losses~~

~~The allowance for credit losses is the sum of the allowance for credit losses - loans and the unfunded loan commitment liabilities.~~ Unfunded loan commitment ~~liabilities is~~reserves are included in “Accounts payable ~~accrued liabilities~~ and other liabilities” in the unaudited Condensed Consolidated Balance Sheets. Provisions for the unfunded loan commitments are included in ~~“General and administrative expenses” in~~ the unaudited Condensed Consolidated Statements of ~~Income.~~Income in “General and administrative expenses”.

The following tables present a summary of the activity in the ~~allowance for credit losses~~unfunded loan commitment reserves for the periods indicated:

Three Months Ended March 31, 2022
(Dollars in thousands) Allowance for Credit Losses - Loans Unfunded Loan Commitment Liabilities Total Allowance for Credit Losses
Balance at January 1, 2022 $ 140,489 $ 8,723 $ 149,212
Provision for Credit Losses 4,500 1,000 5,500
Charge-offs (1,892) — (1,892)
Recoveries 275 — 275
Balance at March 31, 2022 $ 143,372 $ 9,723 $ 153,095


	Three Months Ended December 31,
(Dollars in thousands)	2022		2021
BALANCE—beginning October 1	$	10,973	$	7,723
Provision (benefit)	(499)		1,000
BALANCE—end December 31	$	10,474	$	8,723


	Six Months Ended December 31,
(Dollars in thousands)	2022		2021
BALANCE—beginning July 1	$	10,973	$	5,723
Provision (benefit)	(499)		3,000
BALANCE—end December 31	$	10,474	$	8,723

Three Months Ended March 31, 2021
(Dollars in thousands) Allowance for Credit Losses - Loans Unfunded Loan Commitment Liabilities Total Allowance for Credit Losses
Balance at January 1, 2021 $ 136,393 $ 5,723 $ 142,116
Provision for Credit Losses 2,700 — 2,700
Charge-offs (1,405) — (1,405)
Recoveries 419 — 419
Balance at March 31, 2021 $ 138,107 $ 5,723 $ 143,830

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For the Nine Months Ended March 31, 2022
(Dollars in thousands) Allowance for Credit Losses - Loans Unfunded Loan Commitment Liabilities Total Allowance for Credit Losses
Balance at July 1, 2021 $ 132,958 $ 5,723 $ 138,681
Provision for Credit Losses 12,500 4,000 16,500
Charge-offs (3,248) — (3,248)
Recoveries 1,162 — 1,162
Balance at March 31, 2022 $ 143,372 $ 9,723 $ 153,095

For the Nine Months Ended March 31, 2021
(Dollars in thousands) Allowance for Credit Losses - Loans Unfunded Loan Commitment Liabilities Total Allowance for Credit Losses
Balance at July 1, 2020 $ 75,807 $ 323 $ 76,130
Effect of Adoption of ASC 326 47,300 5,700 53,000
Provision for Credit Losses 22,500 (300) 22,200
Charge-offs (8,553) — (8,553)
Recoveries 1,053 — 1,053
Balance at March 31, 2021 $ 138,107 $ 5,723 $ 143,830

6. ~~SUBORDINATED NOTES~~

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 227 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.

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7. EQUITY AND STOCK-BASED COMPENSATION

~~Amended and Restated 2014 Stock Incentive Plan.~~ ~~On October 21, 2021 the Company’s stockholders approved~~ The Company has an equity incentive plan, the Amended and Restated 2014 Stock Incentive Plan (the “2014 Plan”), which ~~reserved 1000000 additional shares~~provides for ~~purposes~~the granting of non-qualified and incentive stock options, restricted stock and restricted stock units, stock appreciation rights and other awards to employees, directors and consultants. The Plan is designed to encourage selected employees and directors to improve operations and increase profits, and to accept or continue employment or association with the Company through participation in the growth in the value of the Company’s ~~equity compensation.~~common stock. The Company also has an employment agreement with its Chief Executive Officer that authorizes an award of restricted stock units (the “RSU award”). For additional information regarding the Company’s stock-based compensation plans, see Note 16—“Stock-based Compensation” contained in the 2022 Form 10-K.

~~Restricted Stock Units.~~ ~~During the nine months ended March~~At December 31, 2022, ~~and 2021,~~1,650,944 shares of common stock remained available for issuance pursuant to grant awards under the ~~Company granted 526,699~~2014 Plan and 614,406 restricted stock unit awards (“RSUs”) to employees and directors, and during the nine months ended March 31, 2022 granted 478,353 RSU’s to the chief executive officer, which vest ratably on each of the four fiscal year ends after the issue date. All other RSUs granted during these quarters generally vest over 3 years, one-third on each anniversary date.

The Company’s pre-tax income and net income for the nine months ended March 31, 2022 and 2021 include stock award expense of $15.9 million and $15.8 million, with total income tax benefit of $4.6 million and $4.7 million, respectively. The Company recognizes compensation expense based upon the grant-date fair value divided by the vesting and the service period between each vesting date. At March 31, 2022, unrecognized compensation expense related to non-vested awards aggregated to ~~$43.7~~$42.4 million and is expected to be recognized in future periods as follows:


(Dollars in thousands)	(Dollars in thousands)	Stock Award Compensation Expense		(Dollars in thousands)	Stock Award Compensation Expense
For the fiscal year remainder:	For the fiscal year remainder:			For the fiscal year remainder:
2022		$	5,481
2023		18,443
Remainder of fiscal year 2023				Remainder of fiscal year 2023	$	11,973
2024	2024	13,142		2024	18,856
2025	2025	5,253		2025	9,293
2026	2026	989		2026	1,926
Thereafter		400
2027				2027	400

Total	Total	$	43,708	Total	$	42,448

The following table presents the status and changes in restricted stock units for the periods indicated:


		Restricted Stock Units	Weighted-Average Grant-Date Fair Value			Restricted Stock Units	Weighted-Average Grant-Date Fair Value
Non-vested balance at June 30, 2020		1,445,540	$	28.62

Non-vested balance at June 30, 2022					Non-vested balance at June 30, 2022	1,350,763	$	41.16
Granted	Granted	617,833	32.12		Granted	407,632	39.03
Vested	Vested	(666,790)	29.23		Vested	(293,869)	31.89
Forfeited	Forfeited	(176,113)	27.42		Forfeited	(39,444)	40.88
Non-vested balance at June 30, 2021		1,220,470	$	30.18
Granted		1,005,052	48.31
Vested		(503,272)	29.52
Forfeited		(123,406)	35.58
Non-vested balance at March 31, 2022		1,598,844	$	41.41
Non-vested balance at December 31, 2022					Non-vested balance at December 31, 2022	1,425,082	$	42.47

The total fair value of shares vested for the three and ~~nine~~six months ended ~~March~~December 31, 2022 was ~~$9,725~~$0.1 million and ~~$24,559.~~$12.1 million, respectively. The total fair value of shares vested for the three and ~~nine~~six months ended ~~March~~December 31, 2021 was ~~$8,366~~$0.3 million and ~~$16,612.~~$14.8 million, respectively. The weighted-average remaining time period until vesting for restricted stock units as of December 31, 2022 was 1.2 years.

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7. EARNINGS PER COMMON SHARE

Earnings per common share (“EPS”) is 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 and preferred stock redemption charge) by the sum of the weighted-average number of common shares outstanding during the year and the unvested average of participating RSUs. 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 unvested stock-based compensation awards issued under the Amended and Restated 2014 Stock Incentive Plan have no stockholder rights, meaning they are not entitled to dividends and are considered nonparticipating. The Company does not include these nonparticipating RSUs in the basic EPS calculation, but are included in the diluted EPS calculation using the treasury stock method.

The following table presents the calculation of basic and diluted EPS:

Three Months Ended Nine Months Ended
March 31, March 31,
(Dollars in thousands, except per share data) 2022 2021 2022 2021
Earnings Per Common Share
Net income $ 61,823 $ 53,645 $ 182,820 $ 161,452
Preferred stock dividends — — — (103)
Preferred stock redemption charge — — — (87)
Net income attributable to common stockholders $ 61,823 $ 53,645 $ 182,820 $ 161,262
Average common shares outstanding 59,542,128 59,118,884 59,476,488 59,225,409
Total qualifying shares 59,542,128 59,118,884 59,476,488 59,225,409
Earnings per common share $ 1.04 $ 0.91 $ 3.07 $ 2.72
Diluted Earnings Per Common Share
Net income attributable to common stockholders $ 61,823 $ 53,645 $ 182,820 $ 161,262
Average common shares issued and outstanding 59,542,128 59,118,884 59,476,488 59,225,409
Dilutive effect of average unvested RSUs 1,069,831 1,363,849 1,128,998 1,227,811
Total dilutive common shares outstanding 60,611,959 60,482,733 60,605,486 60,453,220
Diluted earnings per common share $ 1.02 $ 0.89 $ 3.02 $ 2.67


	Three Months Ended				Six Months Ended
	December 31,				December 31,
(Dollars in thousands, except per share data)	2022		2021		2022		2021
Earnings Per Common Share



Net income	$	81,552	$	60,787	$	139,959	$	120,997
Average common shares issued and outstanding	59,999,573		59,496,489		59,927,078		59,443,667


Earnings per common share	$	1.36	$	1.02	$	2.34	$	2.04
Diluted Earnings Per Common Share
Net income	$	81,552	$	60,787	$	139,959	$	120,997
Average common shares issued and outstanding	59,999,573		59,496,489		59,927,078		59,443,667
Dilutive effect of average unvested RSUs	515,062		1,259,492		613,275		1,305,716
Total dilutive common shares outstanding	60,514,635		60,755,981		60,540,353		60,749,383
Diluted earnings per common share	$	1.35	$	1.00	$	2.31	$	1.99

9.8. COMMITMENTS AND CONTINGENCIES

~~COVID-19 Impact.~~The Company has closely monitored the rapid developments of and uncertainties caused by the COVID-19 pandemic. In response to the changes in economic and business conditions as a result of the COVID-19 pandemic, the Company continues to take the necessary and appropriate actions to support customers, employees, partners and shareholders.

The Company took proactive measures to manage loans that became delinquent during the recent economic downturn as a result of the COVID-19 pandemic. As of March 31, 2022, no loans were on forbearance status for a forbearance granted from any prior date. Any forbearance granted out of COVID-19 was for six months or less.

~~The Company will continue to monitor uncertainties caused by and developments of COVID-19.~~

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Operating Leases. The Company leases office space under operating lease agreements scheduled to expire at various dates. The following table represents maturities of lease liabilities as of ~~March~~December 31, 2022 in the corresponding fiscal years:

(Dollars in thousands)
Remainder of 2022 $ 2,498
2023 10,595
2024 10,287
2025 10,119
2026 9,791
Thereafter 38,821
Total lease payments 82,111
Less: amount representing interest (8,668)
Total Lease Liability $ 73,443



(Dollars in thousands)
Remainder of fiscal year 2023	$	5,450
2024	10,976
2025	11,143
2026	10,811
2027	10,870
Thereafter	29,177
Total lease payments	78,427
Less: amount representing interest	(7,569)
Total Lease Liability	$	70,858

Credit-Related Financial Instruments. The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the unaudited condensed consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

At ~~March~~December 31, 2022, the Company had commitments to originate ~~$160.1~~$93.3 million in fixed rate loans and ~~$2,660.3~~$2,956.4 million in variable rate loans, totaling an aggregate ~~outstanding~~ principal balance of ~~$2,820.3~~$3,049.6 million. At ~~March~~December 31, 2022, the Company’s fixed rate commitments to originate had a weighted-average rate of ~~5.19%~~9.45%. At ~~March~~December 31, 2022, the Company also had commitments to sell ~~$33.0~~$4.6 million in fixed rate loans and ~~none in~~no variable rate loans, totaling an aggregate ~~outstanding~~ principal balance of ~~$33.0~~$4.6 million.

Commitments to extend credit are agreements to lend to a customer so long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

~~At March 31, 2022 the Company had a commitment to fund an equity investment measured at fair value~~

Table of ~~$10 million. At March 31, 2022, no amounts had been funded related to the investment.~~Contents

In the normal course of business, Axos Clearing’s customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose Axos Clearing to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and Axos Clearing has to purchase or sell the financial instrument underlying the contract at a loss. Axos Clearing’s clearing agreements with broker-dealers for which it provides clearing services requires them to indemnify Axos Clearing if customers fail to satisfy their contractual obligation.

Litigation. On October 15, 2015, the Company, its Chief Executive Officer and its ~~then~~ 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 ~~then~~ 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~~“HMEPS 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 appealed, the Court overturned the dismissal and the Company is preparing a petition for a rehearing. On April 13, 2022, the parties executed a Stipulation and Agreement of Settlement. The

~~Table of Contents~~

Stipulation and Agreement of Settlement was submitted to the District Court for approval on April 15, 2022. ~~There is no assurance that~~On June 8, 2022, the court granted preliminary approval ~~will be granted. The agreed to settlement amount is not material to the Condensed Consolidated Financial Statements, as of and for the quarter ended March 31, 2022.~~

On April 3, 2017, the Company, its Chief Executive Officer and its then 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~~settlement and scheduled a hearing with respect to final approval 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.~~settlement for October 7, 2022. 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 the Court took the matter under advisement. On November 3, 2020, the Court issued a ruling affirming in part and reversing in part the District Court's Order dismissing the Class Action Second Amended Complaint. The defendants filed a petition for rehearing en banc on November 17, 2020, which petition was denied on December 16, 2020. The defendants filed a motion to dismiss the remanded complaint on February 19, 2021. On January 31,October 14, 2022, ~~a Stipulation of Settlement was submitted to~~ the District Court ~~for approval. There is~~entered an order granting final approval of such settlement. The settlement was reached because the parties were able to negotiate terms within available insurance coverage and reach a stipulation that specifically provides that (i) all amounts due in connection with the settlement be paid exclusively by the insurers and that defendants have no ~~assurance that approval will~~direct liability in connection therewith, (ii) no wrongdoing be ~~granted. The agreed~~attributed to Axos, its management or its directors, (iii) the settlement ~~amount~~ is not ~~material~~ to be construed as conceding or evidencing the ~~Condensed Consolidated Financial Statements,~~truth or validity of any claim or allegation made by plaintiffs, and (iv) the defendants shall be deemed to have agreed, or otherwise be required, to modify, amend or restate any business practices, policies, procedures, regulatory filings or financial records, as ~~of and for the quarter ended March 31, 2022.~~

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.a result thereof.

In addition to the ~~First~~HMEPS Class Action, ~~and the Mandalevy Case, 2~~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 6six 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 4six above-referenced derivative actions pending before it to be consolidated and appointed lead counsel in the consolidated action. ~~On June 7, 2018,~~The matter has been stayed until pending post-trial motions in 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 October 16, 2018, defendants filed a motion to dismiss the second amended complaint. The Court dismissed the second amended complaint with prejudice on May 23, 2019. Subsequently, the plaintiff filed a notice of appeal and opening brief and the Company filed its answering brief. Oral argument was held September 2, 2020 and the Court took the matter under advisement.

~~The 2~~Matter are resolved.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~~On October 26, 2022, a jury verdict was reached in the case of MUFG Union Bank, N.A. v. Axos Bank, et al, awarding damages to Union Bank. Such verdict has yet to be reduced to judgment. On November 28, 2022, the Company filed a post-trial motion requesting, among other relief, that the court set aside the verdict and direct a verdict for defendants. The Company continues to believe that the evidence supports the defendants’ understanding of the ~~inherent difficulty~~facts and that meritorious defenses exist to substantially all claims made by Union Bank. In addition, the Company believes that there exist substantial grounds for post-verdict relief and appeal. The Company recorded a $16 million accrued expense in accounts payable and other liabilities on the condensed consolidated balance sheets and in general and administrative expense on the condensed consolidated statements of ~~predicting~~income as of and for 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, unless otherwise disclosed above.six months ended December 31, 2022, respectively.

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~~10.~~9. SEGMENT REPORTING AND REVENUE INFORMATION

~~There are no material inter-segment sales or transfers.~~ Segment Reporting. The ~~accounting policies used by each reportable segment~~operating segments reported below are the ~~same as those discussed~~segments of the Company for which separate financial information is available and for which segment results are evaluated regularly by the Chief Executive Officer in ~~Note 1 - “Organizations~~deciding how to allocate resources and ~~Summary~~in assessing performance. The operating segments and segment results of ~~Significant Accounting Policies”~~the Company are determined based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments and by which segment results are evaluated by the Chief Executive Officer in ~~our Annual Report~~deciding how to allocate resources and in assessing performance.

The Company evaluates performance and allocates resources based on ~~Form 10-K for the year ended June 30, 2021. All costs, except certain~~pre-tax profit or loss from operations. Certain corporate administration costs and income taxes have not been allocated to the reportable segments. ~~Therefore, combined amounts agree~~The Company operates through two operating segments: Banking Business and Securities Business. Inter-segment transactions are eliminated in consolidation and primarily include non-interest income earned by the Securities Business segment and non-interest expense incurred by the Banking Business segment for cash sorting fees related to deposits sourced from Securities Business segment customers, as well as interest expense paid by the Banking Business segment to each of the wholly-owned subsidiaries of the Company and to the ~~unaudited condensed consolidated totals.~~ Company itself for their operating cash held on deposit with the Business Banking segment.

In order to reconcile the 2two segments to the unaudited condensed consolidated totals, the Company includes parent-only activities and intercompany eliminations. The following tables present the operating results, goodwill, and assets of the segments:


		For the Three Months Ended March 31, 2022									For the Three Months Ended December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated		(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	Net interest income	$	147,828	$	3,377	$	(1,667)	$	149,538	Net interest income	$	198,545	$	4,876	$	(3,511)	$	199,910
Provision for credit losses	Provision for credit losses	4,500		—		—		4,500		Provision for credit losses	3,500		—		—		3,500
Non-interest income	Non-interest income	15,741		15,609		(2,576)		28,774		Non-interest income	10,557		36,004		(18,232)		28,329
Non-interest expense	Non-interest expense	65,076		20,242		1,501		86,819		Non-interest expense	96,284		25,271		(14,027)		107,528
Income before taxes	Income before taxes	$	93,993	$	(1,256)	$	(5,744)	$	86,993	Income before taxes	$	109,318	$	15,609	$	(7,716)	$	117,211

For the Three Months Ended March 31, 2021
(Dollars in thousands) Banking
Business Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 135,096 $ 3,847 $ (3,274) $ 135,669
Provision for credit losses 2,700 — — 2,700
Non-interest income 16,201 8,369 (683) 23,887
Non-interest expense 64,040 13,282 3,485 80,807
Income before taxes $ 84,557 $ (1,066) $ (7,442) $ 76,049

For the Nine Months Ended March 31, 2022
(Dollars in thousands) Banking
Business Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 432,328 $ 14,059 $ (4,639) $ 441,748
Provision for credit losses 12,500 — — 12,500
Non-interest income 46,864 45,169 (5,770) 86,263
Non-interest expense 190,250 61,169 5,850 257,269
Income before taxes $ 276,442 $ (1,941) $ (16,259) $ 258,242


		For the Nine Months Ended March 31, 2021									For the Three Months Ended December 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated		(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	Net interest income	$	390,268	$	13,002	$	(6,182)	$	397,088	Net interest income	$	142,259	$	4,506	$	(1,197)	$	145,568
Provision for credit losses	Provision for credit losses	22,500		—		—		22,500		Provision for credit losses	4,000		—		—		4,000
Non-interest income	Non-interest income	68,708		20,725		(973)		88,460		Non-interest income	16,295		16,454		(1,962)		30,787
Non-interest expense	Non-interest expense	187,733		35,946		8,971		232,650		Non-interest expense	62,449		21,654		1,916		86,019
Income before taxes	Income before taxes	$	248,743	$	(2,219)	$	(16,126)	$	230,398	Income before taxes	$	92,105	$	(694)	$	(5,075)	$	86,336



	For the Six Months Ended December 31, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	378,275	$	9,151	$	(7,041)	$	380,385
Provision for credit losses	12,250		—		—		12,250
Non-interest income	21,269		65,169		(30,901)		55,537
Non-interest expense	197,080		49,786		(23,251)		223,615
Income before taxes	$	190,214	$	24,534	$	(14,691)	$	200,057

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As of March 31, 2022
(Dollars in thousands) Banking Business Securities Business Corporate/Eliminations Axos Consolidated
Goodwill $ 35,721 $ 59,953 $ — $ 95,674
Total Assets $ 14,768,636 $ 1,246,997 $ 65,317 $ 16,080,950

As of June 30, 2021
(Dollars in thousands) Banking Business Securities Business Corporate/Eliminations Axos Consolidated
Goodwill $ 35,721 $ 35,501 $ — $ 71,222
Total Assets $ 12,745,029 $ 1,450,512 $ 70,024 $ 14,265,565



	For the Six Months Ended December 31, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	284,500	$	10,682	$	(2,972)	$	292,210
Provision for credit losses	8,000		—		—		8,000
Non-interest income	31,123		29,560		(3,194)		57,489
Non-interest expense	125,174		40,927		4,349		170,450
Income before taxes	$	182,449	$	(685)	$	(10,515)	$	171,249



	As of December 31, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Goodwill	$	35,721	$	61,952	$	—	$	97,673
Total Assets	$	17,893,083	$	805,243	$	42,709	$	18,741,035



	As of June 30, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Goodwill	$	35,721	$	59,953	$	—	$	95,674
Total Assets	$	16,002,714	$	1,328,558	$	69,893	$	17,401,165

Revenue Information. The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Topic 606 for the periods indicated. For further information of the Company’s recognition of revenue and Topic 606 see Note 1—“Organizations and Summary of Significant Accounting Policies” contained in the 2022 Form 10-K.


	For the Three Months Ended				For the Six Months Ended
	December 31,				December 31,
(Dollars in thousands)	2022		2021		2022		2021
Advisory fee income	$	6,983	$	8,035	$	13,942	$	13,339
Broker-dealer clearing fees	4,425		5,343		9,658		11,013
Deposit service fees	2,202		2,406		3,308		3,032
Card fees	2,144		957		2,933		1,964
Bankruptcy trustee and fiduciary service fees	2,167		1,068		2,940		1,848
Non-interest income (in-scope Topic 606)	17,921		17,809		32,781		31,196
Non-interest income (out-of-scope Topic 606)	10,408		12,978		22,756		26,293
Total non-interest income	$	28,329	$	30,787	$	55,537	$	57,489

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ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion provides information about the results of operations, financial condition, liquidity, off balance sheet items and capital resources of Axos Financial, Inc. and subsidiaries (collectively, “we”, “us” or the “Company”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of our operations. This discussion and analysis should be read in conjunction with our financial information in our ~~Annual Report on~~2022 Form 10-K, ~~for the year ended June 30, 2021,~~ and the interim unaudited condensed consolidated financial statements and notes thereto contained in this report.

Some matters discussed in this report may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, may involve risks and uncertainties. These forward-looking statements can be identified by the use of terminology such as “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” “will,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These forward-looking statements relate to, among other things, the ~~effects on our business of the current novel coronavirus pandemic (“COVID-19”), the~~ Company’s financial prospects and other projections of ~~its~~our performance and asset quality, our ability to continue to grow profitably and increase ~~its~~our business, our ability to continue to diversify lending and deposit franchises, and the anticipated timing and financial performance of other offerings, initiatives, and acquisitions, expectations of the environment in which we operate and projections of future ~~performance.~~performance, including any future impacts of the coronavirus pandemic (“COVID-19”). Forward-looking statements are inherently unreliable and actual results may vary. Factors that could cause actual results to differ from these forward-looking statements include ~~uncertainties surrounding the severity, duration, and effects of the COVID-19 pandemic,~~ our ability to successfully integrate acquisitions and realize the anticipated benefits of the transactions, changes in the interest rate environment, inflation, government regulation, general economic conditions, including uncertainties surrounding the severity, duration, and effects of the COVID-19 pandemic, changes in the competitive marketplace, conditions in the real estate markets in which we operate, risks associated with credit quality, the outcome and effects of litigation ~~filed against the Company~~ and other risk factors discussed under the heading “Item 1A. Risk Factors” ~~of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2022~~herein and in our ~~Annual Report on~~2022 Form 10-K, ~~for the year ended June 30, 2021,~~ which has been filed with the ~~Securities and Exchange Commission.~~SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All written and oral forward-looking statements made in connection with this report, which are attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing information.

General

Our Company ~~the holding company for Axos Bank (the “Bank”),~~ is a diversified financial services company with approximately ~~$16.1~~$18.7 billion in ~~assets that~~assets. Axos Bank (the “Bank”) provides consumer and business banking products through its online, low-cost distribution channels and affinity partners. Our 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 automobiles. Our Bank generates fee income from consumer and business products including fees from loans originated for sale, deposit account service fees as well as technology and payment transaction ~~fees earned from~~ processing ~~payment activity.~~fees. Our securities products and services are offered through Axos Clearing LLC (“Axos Clearing”) and its business division Axos Advisor Services (“AAS”)~~, formerly E*TRADE Advisor Services,~~ and Axos Invest, Inc. (“Axos Invest”), which 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. Axos Invest LLC is an introducing broker-dealer which supports direct trading and Axos Invest, Inc. Axos Financial, Inc.’s common stock is listed on the New York Stock Exchange and is a component of the Russell ~~2000~~®2000® Index, the KBW Nasdaq Financial Technology Index, the S&P SmallCap ~~600~~®600® Index, the KBW Nasdaq Financial Technology Index, and the Travillian Tech-Forward Bank Index.

Axos Financial, Inc. is supervised and regulated as a savings and loan holding company by the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and is required to file reports with, comply with the rules and regulations of, and is subject to, examination by the Federal Reserve.

Our Bank is a federal savings bank wholly-owned by our Company and regulated by the Office of the Comptroller of the Currency (“OCC”), and the Federal Deposit Insurance Corporation (“FDIC”) as its deposit insurer. The Bank must file reports with the OCC and the FDIC concerning its activities and financial condition. As a depository institution with more than $10 billion in assets, our Bank and our affiliates are subject to direct supervision by the Consumer Financial Protection Bureau.

Axos Clearing is a 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, and Axos Invest LLC is an introducing broker-dealer that is registered with the SEC and FINRA.

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Segment Information

The Company determines reportable segments based on what separate financial information is available and what segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance. We operate through two segments: the Banking Business segment and the Securities ~~Business.~~Business segment.

Banking Business. The Banking Business segment includes a broad range of banking services including online banking, concierge banking, and mortgage, vehicle and unsecured lending through online and telephonic distribution channels to serve the needs of ~~consumer~~consumers and small businesses nationally. Our deposit products consist of demand, savings, money market and time deposit accounts. In addition, the Banking Business segment 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~~segment 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.

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 investment securities consist of agency and non-agency mortgage-backed securities, municipal securities and other non-agency debt 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 risks and rewards are not sufficient to support our required return on equity.

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

Securities services includes fully disclosed clearing services through Axos Clearing to FINRA- and SEC-registered member firms for trade execution and clearance as well as back-office services such as record keeping, trade and performance reporting, accounting, general back-office support, securities and margin lending, reorganization assistance and custody of securities. We provide financing to our brokerage customers for their securities trading activities through margin loans that are collateralized by securities, cash, or other acceptable collateral. Securities lending activities include borrowing and lending securities with other broker-dealers. These activities involve borrowing securities to cover short sales and to complete transactions in which clients have failed to deliver securities by the required settlement date, and lending securities to other broker dealers for similar purposes.

Through the RIA custody business, we provide a proprietary, turnkey technology platform for custody services for our RIA customers. This platform provides fee income and service that complement our securities business products, while also generating low cost core deposits.

Axos Invest includes our digital wealth management business, which provides our retail customers with self-directed trading and investment management services through a comprehensive and flexible technology platform.

Segment results are compiled based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments. 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 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 unaudited condensed consolidated totals, we include parent-only activities and intercompany eliminations.

~~COVID-19 Impact~~

The Company has closely monitored the rapid developments of and uncertainties caused by the COVID-19 pandemic. In response to the changes in economic and business conditions as a result of the COVID-19 pandemic, the Company continues to take the necessary and appropriate actions to support customers, employees, partners and shareholders.

The Company took proactive measures to manage loans that became delinquent during the economic downturn as a result of the COVID-19 pandemic. As of March 31, 2022, no loans were on forbearance status for a forbearance granted from any prior date. Any forbearance granted out of COVID-19 was for six months or less.

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~~The Company will continue to monitor uncertainties caused by and developments of COVID-19.~~

~~Mergers and Acquisitions~~

From time to time we undertake acquisitions or similar transactions consistent with our Company’s operating and growth strategies. On August 2, 2021 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 Advisors 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 purchase price of $54.8 million consisted entirely of cash consideration paid upon acquisition and working capital adjustments.

Critical Accounting ~~Policies~~Estimates

The following discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed 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 unaudited condensed consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the unaudited condensed 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~~and could have a material effect on the carrying value of assets and liabilities, ~~at the balance sheet dates and~~ our results of operations ~~for~~and/or our cash flows.

Critical accounting estimates are those we consider most important to the ~~reporting periods.~~

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. Our ~~significant~~critical accounting ~~policies and practices~~estimates are described in ~~greater~~ detail in Note 1 - ~~“Summary~~“Organizations and Summary of Significant Accounting Policies” and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting ~~Policies”~~Policies and Estimates” contained in ~~our Annual Report on~~the 2022 Form ~~10-K filed with the Securities and Exchange Commission for the fiscal year ended June~~ 10-K.

30 ~~2021.~~

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USE OF NON-GAAP FINANCIAL MEASURES

In addition to the results presented in accordance with GAAP, this report includes the non-GAAP financial measures adjusted earnings, adjusted earnings per common share, and 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~~As noted below with respect to each measure, we believe the non-GAAP financial measures disclosed in this report enhance investors’ understanding of our business and performance, and our management uses these non-GAAP measures when it internally evaluates the performance of our business and makes operating decisions. However, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.

We define “adjusted earnings”, a non-GAAP financial measure, 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 non-recurring charges). 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 and adjusted EPS provide useful information about the Company’s operating performance. We believe excluding the non-recurring ~~acquisition related~~acquisition-related costs, and other costs ~~(unusual or non-recurring charges)~~ provides investors with an alternative understanding of ~~Axos’ business without these non-recurring costs.~~

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our core 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:

Three Months Ended Nine Months Ended
March 31, March 31,
(Dollars in thousands, except per share amounts) 2022 2021 2022 2021
Net income $ 61,823 $ 53,645 $ 182,820 $ 161,452
Acquisition-related costs
2,803 2,511 8,676 7,665
Tax effects of adjustments (811) (740) (2,534) (2,285)
Adjusted earnings (Non-GAAP) $ 63,815 $ 55,416 $ 188,962 $ 166,832
Adjusted EPS (Non-GAAP) $ 1.05 $ 0.92 $ 3.12 $ 2.76


	Three Months Ended				Six Months Ended
	December 31,				December 31,
(Dollars in thousands, except per share amounts)	2022		2021		2022		2021
Net income	$	81,552	$	60,787	$	139,959	$	120,997
Acquisition-related costs	2,590		3,026		5,324		5,872

Other costs	—		—		16,000		—
Tax effects of adjustments	(788)		(896)		(6,406)		(1,723)
Adjusted earnings (Non-GAAP)	$	83,354	$	62,917	$	154,877	$	125,146

Adjusted EPS (Non-GAAP)	$	1.38	$	1.04	$	2.56	$	2.06

We define “tangible book value”, a non-GAAP financial measure, 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, a non-GAAP financial measure, 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.

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


		March 31,				December 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021			(Dollars in thousands)	2022		2021

Common stockholders’ equity	Common stockholders’ equity	$	1,585,585	$	1,345,650		Common stockholders’ equity	$	1,787,559	$	1,523,157
Less: mortgage servicing rights, carried at fair value	Less: mortgage servicing rights, carried at fair value	23,519		16,631			Less: mortgage servicing rights, carried at fair value	25,526		20,110
Less: goodwill and other intangible assets	Less: goodwill and other intangible assets	159,150		118,133			Less: goodwill and other intangible assets	157,585		161,954
Tangible common stockholders’ equity (Non-GAAP)	Tangible common stockholders’ equity (Non-GAAP)	$	1,402,916	$	1,210,886		Tangible common stockholders’ equity (Non-GAAP)	$	1,604,448	$	1,341,093
Common shares outstanding at end of period	Common shares outstanding at end of period	59,662,795		59,237,765			Common shares outstanding at end of period	60,000,079		59,498,575
Tangible book value per common share (Non-GAAP)	Tangible book value per common share (Non-GAAP)	$	23.51	$	20.44		Tangible book value per common share (Non-GAAP)	$	26.74	$	22.54

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SELECTED FINANCIAL DATA

The following tables set forth certain selected financial data concerning the periods indicated:

AXOS FINANCIAL, INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION

(Dollars in thousands) March 31,
2022 June 30,
2021 March 31,
2021
Selected Balance Sheet Data:
Total assets $ 16,080,950 $ 14,265,565 $ 14,827,874
Loans—net of allowance for credit losses 13,093,603 11,414,814 11,711,215
Loans held for sale, carried at fair value 19,611 29,768 61,500
Loans held for sale, lower of cost or fair value 11,182 12,294 13,371
Allowance for credit losses - loans 143,372 132,958 138,107
Securities—trading 366 1,983 254
Securities—available-for-sale 229,510 187,335 218,962
Securities borrowed 274,644 619,088 543,538
Customer, broker-dealer and clearing receivables 510,561 369,815 351,063
Total deposits 12,733,002 10,815,797 11,612,501
Advances from the FHLB 152,500 353,500 172,500
Borrowings, subordinated notes and debentures
381,682 221,358 365,753
Securities loaned 447,748 728,988 649,837
Customer, broker-dealer and clearing payables 543,905 535,425 483,677
Total stockholders’ equity 1,585,585 1,400,936 1,345,650
Capital Ratios:
Equity to assets at end of period 9.86 % 9.82 % 9.08 %
Axos Financial, Inc.:
Tier 1 leverage (core) capital to adjusted average assets 9.43 % 8.82 % 8.99 %
Common equity tier 1 capital (to risk-weighted assets) 10.23 % 11.36 % 10.86 %
Tier 1 capital (to risk-weighted assets) 10.23 % 11.36 % 10.86 %
Total capital (to risk-weighted assets) 13.30 % 13.78 % 13.32 %
Axos Bank:
Tier 1 leverage (core) capital to adjusted average assets 10.51 % 9.45 % 9.56 %
Common equity tier 1 capital (to risk-weighted assets) 11.43 % 12.28 % 11.74 %
Tier 1 capital (to risk-weighted assets) 11.43 % 12.28 % 11.74 %
Total capital (to risk-weighted assets) 12.24 % 13.21 % 12.71 %
Axos Clearing, LLC:
Net capital $ 39,109 $ 35,950 33,845
Excess capital $ 31,612 $ 27,904 26,338
Net capital as a percentage of aggregate debit items 10.43 % 8.94 % 9.02 %
Net capital in excess of 5% aggregate debit items $ 20,369 $ 15,836 15,077


(Dollars in thousands)	December 31, 2022			June 30, 2022			December 31, 2021
Selected Balance Sheet Data:
Total assets	$	18,741,035		$	17,401,165		$	15,547,947
Loans—net of allowance for credit losses	15,473,212			14,091,061			12,607,179
Loans held for sale, carried at fair value	4,292			4,973			27,428
Loans held for sale, lower of cost or fair value	455			10,938			11,446
Allowance for credit losses - loans	157,218			148,617			140,489
Securities—trading	372			1,758			1,223
Securities—available-for-sale	248,062			262,518			139,581

Securities borrowed	58,846			338,980			534,243
Customer, broker-dealer and clearing receivables	272,579			417,417			429,634
Total deposits	15,690,494			13,946,422			12,269,172

Advances from the FHLB	100,000			117,500			157,500
Borrowings, subordinated debentures and other borrowings	334,077			445,244			260,435
Securities loaned	156,008			474,400			578,762
Customer, broker-dealer and clearing payables	420,947			511,654			528,796
Total stockholders’ equity	1,787,559			1,642,973			1,523,157

Capital Ratios:
Equity to assets at end of period	9.54		%	9.44		%	9.80		%
Axos Financial, Inc.:
Tier 1 leverage (to adjusted average assets)	9.06		%	9.25		%	9.42		%
Common equity tier 1 capital (to risk-weighted assets)	10.55		%	9.86		%	10.08		%
Tier 1 capital (to risk-weighted assets)	10.55		%	9.86		%	10.08		%
Total capital (to risk-weighted assets)	13.49		%	12.73		%	12.16		%
Axos Bank:
Tier 1 leverage (to adjusted average assets)	10.05		%	10.65		%	10.13		%
Common equity tier 1 capital (to risk-weighted assets)	11.28		%	11.24		%	10.91		%
Tier 1 capital (to risk-weighted assets)	11.28		%	11.24		%	10.91		%
Total capital (to risk-weighted assets)	12.13		%	12.01		%	11.73		%
Axos Clearing LLC:
Net capital	$	60,334		$	38,915		$	39,453
Excess capital	$	55,977		$	32,665		$	32,171
Net capital as a percentage of aggregate debit items	27.69		%	12.45		%	10.84		%
Net capital in excess of 5% aggregate debit items	$	49,441		$	23,290		$	21,249

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AXOS FINANCIAL, INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL INFORMATION


		At or for the Three Months Ended						At or for the Nine Months Ended							At or for the Three Months Ended						At or for the Six Months Ended
		March 31,						March 31,							December 31,						December 31,
(Dollars in thousands, except per share data)	(Dollars in thousands, except per share data)	2022			2021			2022			2021			(Dollars in thousands, except per share data)	2022			2021			2022			2021
Selected Income Statement Data:	Selected Income Statement Data:													Selected Income Statement Data:
Interest and dividend income	Interest and dividend income	$	160,181		$	155,674		$	475,567		$	460,942		Interest and dividend income	$	279,588		$	157,076		$	503,374		$	315,386
Interest expense	Interest expense	10,643			20,005			33,819			63,854			Interest expense	79,678			11,508			122,989			23,176
Net interest income	Net interest income	149,538			135,669			441,748			397,088			Net interest income	199,910			145,568			380,385			292,210
Provision for credit losses	Provision for credit losses	4,500			2,700			12,500			22,500			Provision for credit losses	3,500			4,000			12,250			8,000
Net interest income after provision for credit losses	Net interest income after provision for credit losses	145,038			132,969			429,248			374,588			Net interest income after provision for credit losses	196,410			141,568			368,135			284,210
Non-interest income	Non-interest income	28,774			23,887			86,263			88,460			Non-interest income	28,329			30,787			55,537			57,489
Non-interest expense	Non-interest expense	86,819			80,807			257,269			232,650			Non-interest expense	107,528			86,019			223,615			170,450
Income before income tax expense	Income before income tax expense	86,993			76,049			258,242			230,398			Income before income tax expense	117,211			86,336			200,057			171,249
Income tax expense	Income tax expense	25,170			22,404			75,422			68,946			Income tax expense	35,659			25,549			60,098			50,252
Net income	Net income	$	61,823		$	53,645		$	182,820		$	161,452		Net income	$	81,552		$	60,787		$	139,959		$	120,997
Net income attributable to common stock		$	61,823		$	53,645		$	182,820		$	161,262

Per Common Share Data:	Per Common Share Data:													Per Common Share Data:
Net income:	Net income:													Net income:
Basic	Basic	$	1.04		$	0.91		$	3.07		$	2.72		Basic	$	1.36		$	1.02		$	2.34		$	2.04
Diluted	Diluted	$	1.02		$	0.89		$	3.02		$	2.67		Diluted	$	1.35		$	1.00		$	2.31		$	1.99
Adjusted earnings (Non-GAAP)		$	1.05		$	0.92		$	3.12		$	2.76
Book value		$	26.58		$	22.72		$	26.58		$	22.72
Tangible book value (Non-GAAP)		$	23.51		$	20.44		$	23.51		$	20.44
Adjusted earnings per common share (Non-GAAP)1														Adjusted earnings per common share (Non-GAAP)1	$	1.38		$	1.04		$	2.56		$	2.06
Book value per common share														Book value per common share	$	29.79		$	25.60		$	29.79		$	25.60
Tangible book value per common share (Non-GAAP)1														Tangible book value per common share (Non-GAAP)1	$	26.74		$	22.54		$	26.74		$	22.54

Weighted average number of common shares outstanding:	Weighted average number of common shares outstanding:													Weighted average number of common shares outstanding:
Basic	Basic	59,542,128			59,118,884			59,476,488			59,225,409			Basic	59,999,573			59,496,489			59,927,078			59,443,667
Diluted	Diluted	60,611,959			60,482,733			60,605,486			60,453,220			Diluted	60,514,635			60,755,981			60,540,353			60,749,383
Common shares outstanding at end of period	Common shares outstanding at end of period	59,662,795			59,237,765			59,662,795			59,237,765			Common shares outstanding at end of period	60,000,079			59,498,575			60,000,079			59,498,575
Common shares issued at end of period	Common shares issued at end of period	68,617,410			67,902,239			68,617,410			67,902,239			Common shares issued at end of period	69,153,591			68,376,837			69,153,591			68,376,837

Performance Ratios and Other Data:	Performance Ratios and Other Data:													Performance Ratios and Other Data:
Loan originations for investment	Loan originations for investment	$	2,363,599		$	1,189,750		$	6,981,749		$	4,430,540		Loan originations for investment	$	2,013,576		$	2,525,871		$	4,499,800		$	4,618,150
Loan originations for sale	Loan originations for sale	$	166,327		$	418,618		$	569,614		$	1,349,683		Loan originations for sale	$	43,227		$	193,320		$	113,300		$	403,287

Return on average assets	Return on average assets	1.59		%	1.52		%	1.63		%	1.55		%	Return on average assets	1.77		%	1.63		%	1.55		%	1.65		%
Return on average common stockholders’ equity	Return on average common stockholders’ equity	15.89		%	16.12		%	16.33		%	16.90		%	Return on average common stockholders’ equity	18.71		%	16.29		%	16.35		%	16.51		%
Interest rate spread1		3.84		%	3.73		%	3.93		%	3.69		%
Net interest margin2		4.02		%	3.96		%	4.11		%	3.91		%
Net interest margin2 – Banking Business Segment		4.21		%	4.23		%	4.33		%	4.09		%
Efficiency ratio3		51.26		%	50.64		%	48.72		%	47.91		%
Efficiency ratio3 – Banking Business Segment		39.79		%	42.33		%	39.70		%	40.90		%
Interest rate spread2														Interest rate spread2	3.64		%	3.90		%	3.63		%	3.97		%
Net interest margin3														Net interest margin3	4.49		%	4.10		%	4.38		%	4.16		%
Net interest margin3 – Banking Business Segment														Net interest margin3 – Banking Business Segment	4.65		%	4.30		%	4.58		%	4.39		%
Efficiency ratio4														Efficiency ratio4	47.11		%	48.78		%	51.30		%	48.74		%
Efficiency ratio4 – Banking Business Segment														Efficiency ratio4 – Banking Business Segment	46.05		%	39.39		%	49.33		%	39.66		%

Asset Quality Ratios:	Asset Quality Ratios:													Asset Quality Ratios:
Net annualized charge-offs to average loans	Net annualized charge-offs to average loans	0.05		%	0.03		%	0.02		%	0.09		%	Net annualized charge-offs to average loans	0.05		%	0.01		%	0.05		%	0.01		%
Non-performing loans to total loans		1.05		%	1.14		%	1.05		%	1.14		%
Non-performing loans and leases to total loans														Non-performing loans and leases to total loans	0.61		%	1.14		%	0.61		%	1.14		%
Non-performing assets to total assets	Non-performing assets to total assets	0.87		%	0.96		%	0.87		%	0.96		%	Non-performing assets to total assets	0.54		%	0.94		%	0.54		%	0.94		%
Allowance for credit losses - loans to total loans held for investment at end of period		1.08		%	1.16		%	1.08		%	1.16		%
Allowance for credit losses - loans to total loans held for investment														Allowance for credit losses - loans to total loans held for investment	1.00		%	1.10		%	1.00		%	1.10		%
Allowance for credit losses - loans to non-performing loans	Allowance for credit losses - loans to non-performing loans	103.33		%	101.84		%	103.33		%	101.84		%	Allowance for credit losses - loans to non-performing loans	165.51		%	96.27		%	165.51		%	96.27		%

1See “Use of Non-GAAP Financial Measures.”

2 Interest rate spread represents the difference between the annualized weighted average yield on interest-earning assets and the annualized weighted average

rate paid on interest-bearing liabilities.

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

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

3433

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RESULTS OF OPERATIONS

Comparison of the Three and ~~Nine~~Six Months Ended ~~March~~December 31, 2022 and 2021

For the three months ended ~~March~~December 31, 2022, we had net income of ~~$61.8~~$81.6 million, or $1.35 per diluted share, compared to net income of ~~$53.6 million for the three months ended March 31, 2021. Net income attributable to common stockholders was $61.8~~$60.8 million, or ~~$1.02~~$1.00 per diluted share, for the three months ended ~~March~~December 31, ~~2022 compared to net income attributable to common shareholders of $53.6 million, or $0.89 per diluted share for~~2021. For the ~~three~~six months ended ~~March 31, 2021.For the nine months ended March~~December 31, 2022, we had net income of ~~$182.8~~$140.0 million, or $2.31 per diluted share, compared to net income of ~~$161.5 million for the nine months ended March 31, 2021. Net income attributable to common stockholders was $182.8~~$121.0 million, or ~~$3.02~~$1.99 per diluted share for the ~~nine~~six months ended ~~March 31, 2022 compared to net income attributable to common shareholders of $161.3 million, or $2.67 per diluted share for the nine months ended March 31, 2021.~~

Adjusted earnings and adjusted EPS, non-GAAP measures, which exclude non-recurring costs related to mergers and acquisitions (including amortization of intangible assets related to acquisitions), increased 15.2% to $63.8 million and 14.1% to $1.05, respectively, for the quarter ended March 31, 2022 compared to $55.4 million and $0.92, respectively, for the quarter ended March 31, 2021. Adjusted earnings and adjusted EPS increased 13.3% to $189.0 million and 13.0% to $3.12, respectively, for the nine months ended March 31, 2022 compared to $166.8 million and $2.76, respectively, for the nine months ended MarchDecember 31, 2021.

Net Interest Income

Net interest income for the three and ~~nine~~six months ended ~~March~~December 31, 2022 totaled ~~$149.5~~$199.9 million and ~~$441.7~~$380.4 million, an increase of ~~10.2%~~37.3% and ~~11.2%~~30.2%, compared to net interest income of ~~$135.7~~$145.6 million and ~~$397.1~~$292.2 million for the three and ~~nine~~six months ended ~~March~~December 31, 2021, respectively. The increase for the three and ~~nine~~six months ~~were~~was primarily due to ~~increased~~higher average ~~earnings assets from net~~balances and rates earned in the loan portfolio, ~~growth and reduced~~partially offset by higher rates paid on interest-bearing demand and savings deposits and time deposits, partially offset by reduced yields on interest earning assets. During the three and nine months ended March 31, 2022, average non-interest bearing deposits increased $2,001.2 million and $1,628.7 million, respectively, primarily from the deposits acquired through the acquisition of AAS.deposits.

Total interest and dividend income during the three and ~~nine~~six months ended ~~March~~December 31, 2022 increased ~~2.9%~~78.0% to ~~$160.2~~$279.6 million and ~~3.2%~~59.6% to ~~$475.6~~$503.4 million, compared to ~~$155.7~~$157.1 million and ~~$460.9~~$315.4 million during the three and ~~nine~~six months ended ~~March~~December 31, 2021, respectively. The increase in interest and dividend income for the three and six months ended ~~March~~December 31, 2022 was primarily attributable to higher average balances and rates earned in the ~~growth in average earning assets from~~ loan ~~originations, partially offset by reduced yields~~portfolio and higher rates on loans. The average balance of loans increased by 10.7% for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase in interest and dividend income for the nine months ended March 31, 2022 was primarily attributable to the growth in average earning assets from loan originations and securities borrowed and margin lending, partially offset by reduced yields on loans and securities borrowed and margin lending. The average balance of loans and securities borrowed increased by 8.2% and 35.6%, respectively, for the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021.deposits placed with other financial institutions.

Total interest expense was ~~$10.6~~$79.7 million for the three months ended ~~March~~December 31, 2022, ~~a decrease~~an increase of ~~$9.4~~$68.2 million or ~~46.8%~~592.4% as compared with the three months ended ~~March~~December 31, 2021. Total interest expense was ~~$33.8~~$123.0 million for the ~~nine~~six months ended ~~March~~December 31, 2022, ~~a decrease~~an increase of ~~$30.0~~$99.8 million or ~~47.0%~~430.7% as compared with the ~~nine~~six months ended ~~March~~December 31, 2021. The ~~decrease in~~increase for the ~~average cost of funds rate~~three and six months ended December 31, 2022 was primarily attributable to higher rates paid on deposits, as deposit rates continue to increase across the industry. Also contributing to the increase was higher interest expense on advances from the Federal Home Loan Bank (“FHLB”) and other borrowings, which for the three months ended ~~March~~December 31, 2022 ~~compared to 2021~~ was primarily ~~due~~attributable to ~~16 basis point decrease on interest-bearing demand~~higher balances of other borrowings and ~~savings deposits due to decreases in prevailing deposit rates across the industry and a 64 basis point decrease in the three month average~~higher rates paid on ~~time deposits, due~~both FHLB advances and other borrowings, and for the six months ended December 31, 2022, the increase was attributable to higher ~~rate time deposits maturing. The decrease in the~~ average ~~cost of funds rate for the nine months ended March 31, 2022 compared to 2021 was primarily due to a 22 basis point decrease~~balances and higher rates on ~~interest-bearing demand~~both FHLB advances and savings deposits due to decreases in prevailing deposit rates across the industry and a 71 basis point decrease in the nine month average rates paid on time deposits, due to higher rate time deposits maturing. During the three and nine months ended March 31, 2022, average non-interest bearing deposits increased $2,001.2 million and $1,628.7 million, respectively, primarily from the deposits acquired through the acquisition of AAS.other borrowings.

Net interest margin, defined as annualized net interest income divided by average earning assets, increased 639 basis points to ~~4.02%~~4.49% for the three months ended ~~March~~December 31, 2022 from ~~3.96%~~4.10% for the three months ended ~~March~~December 31, 2021, and increased 2022 basis points to ~~4.11%~~4.38% for the ~~nine~~six months ended ~~March~~December 31, 2022 from ~~3.91%~~4.16% for the ~~nine~~six months ended ~~March~~December 31, 2021. During the three and ~~nine~~six months ended ~~March~~December 31, 2022, the primary ~~contributors~~contributor to the 639 and 2022 basis point increases, respectively, was the increase in ~~non-interest bearing~~interest-earning balances and rates, primarily loans, outpacing the increased cost of our deposits ~~which increased $2,001.2 million~~ and ~~$1,628.7 million, respectively, primarily from the deposits acquired through the acquisition of AAS and decreased rates on interest-bearing deposits.~~other funding liabilities.

3534

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

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


		For the Three Months Ended													For the Three Months Ended
		March 31,													December 31,
		2022						2021							2022						2021
(Dollars in thousands)	(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:	Assets:													Assets:
Loans3, 4	Loans3, 4	$	12,842,705	$	153,873	4.79	%	$	11,600,551	$	147,936	5.10	%	Loans3, 4	$	15,452,232	$	255,661	6.62	%	$	12,116,565	$	149,469	4.93	%
Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions	1,286,665		671		0.21	%	1,267,091		482		0.15	%	Interest-earning deposits in other financial institutions	1,664,408		15,614		3.75	%	1,247,675		642		0.21	%
Mortgage-backed and other investment securities4	Mortgage-backed and other investment securities4	162,400		1,546		3.81	%	214,712		2,590		4.83	%	Mortgage-backed and other investment securities4	257,133		3,578		5.57	%	139,711		1,338		3.83	%
Securities borrowed and margin lending5	Securities borrowed and margin lending5	563,018		3,833		2.72	%	616,774		4,453		2.89	%	Securities borrowed and margin lending5	409,543		4,321		4.22	%	686,920		5,366		3.12	%
Stock of the regulatory agencies	Stock of the regulatory agencies	21,333		258		4.84	%	20,612		213		4.13	%	Stock of the regulatory agencies	18,685		414		8.86	%	20,519		261		5.11	%
Total interest-earning assets	Total interest-earning assets	14,876,121		160,181		4.31	%	13,719,740		155,674		4.54	%	Total interest-earning assets	17,802,001		279,588		6.28	%	14,211,390		157,076		4.42	%
Non-interest-earning assets	Non-interest-earning assets	731,997						413,297						Non-interest-earning assets	678,531						676,030
Total assets	Total assets	$	15,608,118					$	14,133,037					Total assets	$	18,480,532					$	14,887,420
Liabilities and Stockholders’ Equity:	Liabilities and Stockholders’ Equity:													Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	Interest-bearing demand and savings	$	6,922,600	$	3,808	0.22	%	$	7,083,540	$	6,691	0.38	%	Interest-bearing demand and savings	$	9,951,529	$	65,028	2.61	%	$	6,587,348	$	4,299	0.26	%
Time deposits	Time deposits	1,194,452		3,116		1.04	%	1,748,271		7,343		1.68	%	Time deposits	1,146,877		6,320		2.20	%	1,333,848		3,506		1.05	%
Securities loaned	Securities loaned	365,808		152		0.17	%	443,502		453		0.41	%	Securities loaned	289,782		1,067		1.47	%	439,035		218		0.20	%

Advances from the FHLB	Advances from the FHLB	289,289		973		1.35	%	194,564		992		2.04	%	Advances from the FHLB	290,918		2,504		3.44	%	272,033		973		1.43	%
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	295,910		2,594		3.51	%	413,858		4,526		4.37	%	Borrowings, subordinated notes and debentures	375,331		4,759		5.07	%	262,781		2,512		3.82	%
Total interest-bearing liabilities	Total interest-bearing liabilities	9,068,059		10,643		0.47	%	9,883,735		20,005		0.81	%	Total interest-bearing liabilities	12,054,437		79,678		2.64	%	8,895,045		11,508		0.52	%
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	4,210,508						2,209,297						Non-interest-bearing demand deposits	3,941,751						3,734,029
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	772,800						708,542						Other non-interest-bearing liabilities	741,066						765,946
Stockholders’ equity	Stockholders’ equity	1,556,751						1,331,463						Stockholders’ equity	1,743,278						1,492,400
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	15,608,118					$	14,133,037					Total liabilities and stockholders’ equity	$	18,480,532					$	14,887,420
Net interest income	Net interest income			$	149,538					$	135,669			Net interest income			$	199,910					$	145,568
Interest rate spread6	Interest rate spread6					3.84	%					3.73	%	Interest rate spread6					3.64	%					3.90	%
Net interest margin7	Net interest margin7					4.02	%					3.96	%	Net interest margin7					4.49	%					4.10	%

1Average balances are obtained from daily data.

2Annualized.

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

4Interest 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. Loans include average balances of $26.3 million and $27.1 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2022 and 2021 three-month periods, respectively.

5Margin lending is the significant component of the asset titled customer, broker-dealer and clearing receivables on the unaudited condensed consolidated balance sheets.

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

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

Table of Contents

~~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 Nine Months Ended													For the Six Months Ended
		March 31,													December 31,
		2022						2021							2022						2021
(Dollars in thousands)	(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:	Assets:													Assets:
Loans3, 4	Loans3, 4	$	12,202,523	$	452,518	4.94	%	$	11,281,748	$	436,445	5.16	%	Loans3, 4	$	15,107,071	$	463,999	6.14	%	$	11,889,439	$	298,645	5.02	%
Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions	1,232,100		1,904		0.21	%	1,491,437		1,482		0.13	%	Interest-earning deposits in other financial institutions	1,449,814		22,961		3.17	%	1,205,409		1,233		0.20	%
Mortgage-backed and other investment securities4	Mortgage-backed and other investment securities4	152,623		4,304		3.76	%	202,327		8,184		5.39	%	Mortgage-backed and other investment securities4	260,102		6,876		5.29	%	148,000		2,759		3.73	%
Securities borrowed and margin lending5	Securities borrowed and margin lending5	718,956		16,050		2.98	%	530,384		14,196		3.57	%	Securities borrowed and margin lending5	537,404		8,705		3.24	%	795,231		12,217		3.07	%
Stock of the regulatory agencies	Stock of the regulatory agencies	20,845		791		5.06	%	20,611		635		4.11	%	Stock of the regulatory agencies	23,483		833		7.09	%	20,607		532		5.17	%
Total interest-earning assets	Total interest-earning assets	14,327,047		475,567		4.43	%	13,526,507		460,942		4.54	%	Total interest-earning assets	17,377,874		503,374		5.79	%	14,058,686		315,386		4.49	%
Non-interest-earning assets	Non-interest-earning assets	624,184						379,629						Non-interest-earning assets	683,127						587,794
Total assets	Total assets	$	14,951,231					$	13,906,136					Total assets	$	18,061,001					$	14,646,480
Liabilities and Stockholders’ Equity:	Liabilities and Stockholders’ Equity:													Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	Interest-bearing demand and savings	$	6,683,286	$	11,674	0.23	%	$	7,117,471	$	23,913	0.45	%	Interest-bearing demand and savings	$	8,851,092	$	92,737	2.10	%	$	6,568,907	$	7,866	0.24	%
Time deposits	Time deposits	1,297,870		10,767		1.11	%	1,889,983		25,770		1.82	%	Time deposits	1,151,797		11,116		1.93	%	1,348,454		7,651		1.13	%
Securities loaned	Securities loaned	489,189		621		0.17	%	380,035		832		0.29	%	Securities loaned	414,362		2,010		0.97	%	549,538		469		0.17	%

Advances from the FHLB	Advances from the FHLB	285,547		2,962		1.38	%	224,119		3,690		2.20	%	Advances from the FHLB	585,633		7,667		2.62	%	283,717		1,989		1.40	%
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	264,523		7,795		3.93	%	366,407		9,649		3.51	%	Borrowings, subordinated notes and debentures	377,650		9,459		5.01	%	249,170		5,201		4.17	%
Total interest-bearing liabilities	Total interest-bearing liabilities	9,020,415		33,819		0.50	%	9,978,015		63,854		0.85	%	Total interest-bearing liabilities	11,380,534		122,989		2.16	%	8,999,786		23,176		0.52	%
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	3,678,067						2,049,366						Non-interest-bearing demand deposits	4,213,995						3,431,150
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	760,083						603,999						Other non-interest-bearing liabilities	754,079						749,781
Stockholders’ equity	Stockholders’ equity	1,492,666						1,274,756						Stockholders’ equity	1,712,393						1,465,763
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	14,951,231					$	13,906,136					Total liabilities and stockholders’ equity	$	18,061,001					$	14,646,480
Net interest income	Net interest income			$	441,748					$	397,088			Net interest income			$	380,385					$	292,210
Interest rate spread6	Interest rate spread6					3.93	%					3.69	%	Interest rate spread6					3.63	%					3.97	%
Net interest margin7	Net interest margin7					4.11	%					3.91	%	Net interest margin7					4.38	%					4.16	%

1Average balances are obtained from daily data.

2Annualized.

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

4Interest 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. Loans include average balances of $26.5 million and $27.3 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2022 and 2021 nine-month periods, respectively.

5Margin lending is the significant component of the asset titled customer, broker-dealer and clearing receivables on the unaudited condensed consolidated balance sheets.

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

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

3736

Table of Contents

Average Balances, Net Interest Income, Yields Earned and Rates Paid

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.


		For the Three Months Ended				For the Nine Months Ended						For the Three Months Ended						For the Six Months Ended
		March 31,				March 31,						December 31,						December 31,
		2022 vs 2021				2022 vs 2021						2022 vs 2021						2022 vs 2021
		Increase (Decrease) Due to				Increase (Decrease) Due to						Increase (Decrease) Due to						Increase (Decrease) Due to
(Dollars in thousands)	(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)		Volume		Rate			Total Increase (Decrease)		(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)		Volume		Rate		Total Increase (Decrease)
Increase / (decrease) in interest income:	Increase / (decrease) in interest income:														Increase / (decrease) in interest income:
Loans	Loans	$	15,257	$	(9,320)	$	5,937	$	35,013	$	(18,940)		$	16,073	Loans	$	47,298	$	58,894	$	106,192	$	90,635	$	74,719	$	165,354

Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions	7		182		189		(301)		723			422		Interest-earning deposits in other financial institutions	291		14,681		14,972		292		21,436		21,728
Mortgage-backed and other investment securities	Mortgage-backed and other investment securities	(559)		(485)		(1,044)		(1,739)		(2,141)			(3,880)		Mortgage-backed and other investment securities	1,454		787		2,241		2,654		1,464		4,118
Securities borrowed and margin lending	Securities borrowed and margin lending	(370)		(250)		(620)		4,470		(2,616)			1,854		Securities borrowed and margin lending	(2,575)		1,530		(1,045)		(4,154)		642		(3,512)
Stock of the regulatory agencies	Stock of the regulatory agencies	7		38		45		7		149			156		Stock of the regulatory agencies	(25)		177		152		82		218		300
		$	14,342	$	(9,835)	$	4,507	$	37,450	$	(22,825)		$	14,625		$	46,443	$	76,069	$	122,512	$	89,509	$	98,479	$	187,988
Increase / (decrease) in interest expense:	Increase / (decrease) in interest expense:														Increase / (decrease) in interest expense:
Interest-bearing demand and savings	Interest-bearing demand and savings	$	(148)	$	(2,735)	$	(2,883)	$	(1,357)	$	(10,882)		$	(12,239)	Interest-bearing demand and savings	$	3,248	$	57,481	$	60,729	$	3,642	$	81,229	$	84,871
Time deposits	Time deposits	(1,919)		(2,308)		(4,227)		(6,682)		(8,321)			(15,003)		Time deposits	(551)		3,365		2,814		(1,251)		4,716		3,465
Securities loaned	Securities loaned	(70)		(231)		(301)		194		(405)			(211)		Securities loaned	(99)		948		849		(142)		1,683		1,541

Advances from the FHLB	Advances from the FHLB	385		(404)		(19)		860		(1,588)			(728)		Advances from the FHLB	73		1,458		1,531		3,121		2,557		5,678
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	(1,143)		(789)		(1,932)		(2,910)		1,056			(1,854)		Borrowings, subordinated notes and debentures	1,274		973		2,247		3,062		1,196		4,258
		$	(2,895)	$	(6,467)	$	(9,362)	$	(9,895)	$	(20,140)		$	(30,035)		$	3,945	$	64,225	$	68,170	$	8,432	$	91,381	$	99,813

Provision for Credit Losses

The provision for credit losses was ~~$4.5~~$3.5 million for the three months ended ~~March~~December 31, 2022 compared to ~~$2.7~~$4.0 million for the three months ended ~~March~~December 31, 2021. The provision for credit losses was ~~$12.5~~$12.3 million for the ~~nine~~six months ended ~~March~~December 31, 2022 compared to ~~$22.5~~$8.0 million for the ~~nine~~six months ended ~~March~~December 31, 2021. The ~~increase in the~~ provision for credit losses for the three and six months ended ~~March~~December 31, 2022 ~~was~~were primarily due to growth in the loan portfolio. The decrease in the provision for the nine months ended March 31, 2022 was due to favorable changes in economic and business conditions resulting from reduced levels of disruptions from the COVID-19 pandemic between March 31, 2021 and March 31, 2022, partially offset by loan growthportfolio and changes in loan product mix. Provisions for credit losses are charged to income to bring the allowance for credit losses - loans to a level deemed appropriate by management based on the factors discussed under “Financial Condition—Asset Quality and Allowance for Credit Losses - Loans.”

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Non-Interest Income

The following table sets forth information regarding our non-interest income for the periods shown:


		For the Three Months Ended						For the Nine Months Ended							For the Three Months Ended						For the Six Months Ended
		March 31,						March 31,							December 31,						December 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		Inc (Dec)		2022		2021		Inc (Dec)		(Dollars in thousands)	2022		2021		Inc (Dec)		2022		2021		Inc (Dec)

Broker-dealer fee income														Broker-dealer fee income	$	9,812	$	6,332	$	3,480	$	18,990	$	12,794	$	6,196
Advisory fee income														Advisory fee income	6,983		8,035		(1,052)		13,942		13,339		603
Banking and service fees														Banking and service fees	10,143		8,486		1,657		16,657		15,166		1,491
Mortgage banking income														Mortgage banking income	641		4,640		(3,999)		4,006		9,910		(5,904)
Prepayment penalty fee income	Prepayment penalty fee income	$	2,793	$	1,342	$	1,451	$	9,073	$	4,289	$	4,784	Prepayment penalty fee income	750		3,294		(2,544)		1,942		6,280		(4,338)
Gain on sale – other		61		214		(153)		106		704		(598)
Mortgage banking income		5,729		9,037		(3,308)		15,594		39,255		(23,661)
Broker-dealer fee income		12,913		7,942		4,971		39,046		19,931		19,115
Banking and service fees		7,278		5,352		1,926		22,444		24,281		(1,837)

Total non-interest income	Total non-interest income	$	28,774	$	23,887	$	4,887	$	86,263	$	88,460	$	(2,197)	Total non-interest income	$	28,329	$	30,787	$	(2,458)	$	55,537	$	57,489	$	(1,952)

Non-interest income ~~increased $4.9~~decreased $2.5 million to ~~$28.8~~$28.3 million for the three months ended ~~March~~December 31, 2022 compared to the three months ended ~~March~~December 31, 2021. The ~~increase~~decrease was primarily the result of lower mortgage banking income as higher mortgage rates contributed to lower originations, and the impact of changes in the fair value of our MSRs. Also contributing to the decrease was lower prepayment penalty fee income due to slower prepayments and a ~~$5.0 million~~decrease in advisory fee income primarily due to lower average assets under custody. These decreases were partially offset by an increase in broker-dealer fee income ~~driven by custody~~from higher rates earned on cash sorting balances placed at non-affiliated banks and ~~mutual fund fees earned by the newly acquired AAS division, an increase of $1.9 million in~~higher banking and service fees, and an increase of $1.5 million in prepayment penalty fee income, partially offset by a decrease of $3.3 million in mortgage banking income. Mortgage banking income for the three months ended March 31, 2022 included a mortgage servicing rights fair market value adjustment of approximately $3.0 million due to expected higher interest rates and slower mortgage prepayments. The fair value adjustment for the three months ended March 31, 2021 was $0.5 million. fees.

Non-interest income decreased ~~$2.2~~$2.0 million to ~~$86.3~~$55.5 million for the ~~nine~~six months ended ~~March~~December 31, 2022 compared to the ~~nine~~six months ended ~~March~~December 31, 2021. The ~~change~~decrease was primarily the result of ~~a $23.7 million decrease in~~lower mortgage banking income as higher mortgage rates contributed to lower originations, and ~~a $1.8 million~~the impact of changes in the fair value of our MSRs. Also contributing to the decrease inwas lower prepayment penalty fee income due to slower prepayments. Partially offsetting these decreases were higher broker-dealer fee income from higher rates earned on cash sorting balances placed at non-affiliated banks, higher banking and service fees as well as higher advisory fee income as incremental revenues from ~~Emerald Prepaid Mastercard® and Refund Transfer products associated with H&R Block that did not recur in~~ the ~~nine months ended March 31, 2022,~~AAS acquisition were partially offset by ~~a $19.1 million increase in broker-dealer fee income driven by custody and mutual fund fees earned by the newly acquired AAS division and an increase of $4.8 million in prepayment penalty fee income.~~lower average assets under custody.

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Non-Interest Expense

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


		For the Three Months Ended						For the Nine Months Ended							For the Three Months Ended						For the Six Months Ended
		March 31,						March 31,							December 31,						December 31,
(Dollars in thousands)	(Dollars in thousands)	2022		2021		Inc (Dec)		2022		2021		Inc (Dec)		(Dollars in thousands)	2022		2021		Inc (Dec)		2022		2021		Inc (Dec)
Salaries and related costs	Salaries and related costs	$	43,133	$	38,545	$	4,588	$	123,849	$	115,367	$	8,482	Salaries and related costs	$	49,720	$	39,979	$	9,741	$	96,716	$	80,716	$	16,000
Data processing	Data processing	12,274		10,171		2,103		36,565		27,772		8,793		Data processing	14,632		12,199		2,433		28,654		24,291		4,363
Depreciation and amortization														Depreciation and amortization	5,957		6,785		(828)		12,051		12,513		(462)
Advertising and promotional	Advertising and promotional	3,357		4,261		(904)		10,131		10,600		(469)		Advertising and promotional	10,899		3,402		7,497		17,269		6,774		10,495
Depreciation and amortization		6,061		5,865		196		18,574		17,913		661
Professional services	Professional services	4,346		5,712		(1,366)		14,834		17,340		(2,506)		Professional services	8,455		5,943		2,512		16,542		10,488		6,054
Occupancy and equipment	Occupancy and equipment	3,742		3,096		646		10,265		9,239		1,026		Occupancy and equipment	3,683		3,342		341		7,737		6,523		1,214
FDIC and regulatory fees	FDIC and regulatory fees	3,115		3,107		8		7,856		8,400		(544)		FDIC and regulatory fees	3,569		2,475		1,094		7,304		4,741		2,563

Broker-dealer clearing charges	Broker-dealer clearing charges	3,561		3,278		283		11,244		7,986		3,258		Broker-dealer clearing charges	3,739		3,678		61		6,568		7,683		(1,115)
General and administrative expense	General and administrative expense	7,230		6,772		458		23,951		18,033		5,918		General and administrative expense	6,874		8,216		(1,342)		30,774		16,721		14,053
Total non-interest expenses	Total non-interest expenses	$	86,819	$	80,807	$	6,012	$	257,269	$	232,650	$	24,619	Total non-interest expenses	$	107,528	$	86,019	$	21,509	$	223,615	$	170,450	$	53,165

Non-interest expense which is comprised of compensation, data processing, depreciation and amortization, advertising and promotional, professional services, occupancy and equipment, FDIC and regulatory fees, broker-dealer clearing charges and other operating expenses, was ~~$86.8~~$107.5 million for the three months ended ~~March~~December 31, 2022, compared to ~~$80.8~~$86.0 million for the three months ended ~~March~~December 31, 2021. Non-interest expense was ~~$257.3~~$223.6 million for the ~~nine~~six months ended ~~March~~December 31, 2022, up from ~~$232.7~~$170.5 million for the ~~nine~~six months ended ~~March~~December 31, 2021. The increases for the three and ~~nine~~six months ended ~~March~~December 31, 2022 were ~~generally~~primarily due to higher salaries and related costs, advertising and promotional expenses, professional services, and for the ~~addition of AAS~~six months ended December 31, 2022, higher other general and ~~the expansion of Bank operations specifically in areas related to lending and deposits.~~administrative expenses.

Total salaries and related costs increased ~~$4.6~~$9.7 million to ~~$43.1~~$49.7 million for the three months ended ~~March~~December 31, 2022 compared to ~~$38.5~~$40.0 million for the three months ended ~~March~~December 31, 2021 and increased ~~$8.5~~$16.0 million to ~~$123.8~~$96.7 million for the ~~nine~~six months ended ~~March~~December 31, 2022 compared to ~~$115.4~~$80.7 million for the ~~nine~~six months ended ~~March~~December 31, 2021. The increases in compensation expense for the three and ~~nine~~six months ended ~~March~~December 31, 2022 were primarily due to increased ~~staffing levels~~headcount as ~~a result of the AAS acquisition.~~well as an increase in salaries. Our ~~staff~~headcount increased to ~~1,294~~1,447 from ~~1,152,~~1,280, or ~~12.3%~~13% between ~~March~~December 31, 2022 and 2021.

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Data processing expense increased ~~$2.1~~$2.4 million for the three months ended ~~March 31, 2022 compared to three months ended March 31, 2021, and increased $8.8 million for the nine months ended March~~December 31, 2022 compared to the ~~nine~~three months ended December 31, 2021, and increased $4.4 million for the six months ended December 31, 2022 compared to the six month period ended ~~March~~December 31, 2021, primarily due to enhancements to customer interfaces and the Company’s ~~core~~ processing systems.

~~Advertising~~Depreciation and ~~promotional~~amortization expense decreased ~~$0.9~~$0.8 million and $0.5 million for the three and ~~nine~~six months ended ~~March~~December 31, 2022, compared to the three and ~~nine~~six months ended ~~March~~December 31, 2021, respectively. ~~Fluctuations are mainly~~The decreases for the three and six months ended December 31, 2022 were primarily due to certain capitalized software becoming fully depreciated, and for the six months ended December 31, 2022, the decrease was partially offset by incremental amortization of intangibles as a result of ~~changes in mortgage~~the AAS acquisition.

Advertising and promotional expense increased $7.5 million and $10.5 million for the three and six months ended December 31, 2022, compared to the three and six months ended December 31, 2021, respectively. The increase was primarily due to increased lead generation and deposit marketing costs.

~~Depreciation and amortization~~Professional services expense increased ~~$0.2~~$2.5 million and ~~$0.7~~$6.1 million for the three and ~~nine~~six months ended ~~March~~December 31, 2022, compared to the three and ~~nine~~six months ended ~~March~~December 31, 2021, respectively. The increase for the three and six months ended December 31, 2022 was primarily due to higher consulting expenses supporting technology investments and for the six months ended December 31, 2022, the increase was also attributable to higher legal expenses related to litigation.

Occupancy and equipment expense increased by $0.3 million and $1.2 million for the three and six months ended December 31, 2022 compared to the three and six months ended December 31, 2021, respectively. The increases for the three and ~~nine~~six months ended ~~March~~December 31, 2022 were primarily due to ~~amortization of intangibles as a result of the AAS acquisition and depreciation on lending platform enhancements and infrastructure development.~~

Professional services expense decreased $1.4 million and decreased $2.5 million for the three and nine months ended March 31, 2022, compared to the three and nine months ended March 31, 2021, respectively. Professional services charges decreased due primarily to lower legal expense during the three and nine months ended March 31, 2022.

Occupancy and equipment expense increased by $0.6 million and $1.0 million for the three and nine months ended March 31, 2022 compared to the three and nine months ended March 31, 2021, respectively. The changes for the three and nine months ended March 31, 2022 are primarily due to annual cost increasesgrowth in our office ~~space lease agreements~~footprint and ~~the addition of an assumed~~annual increases on our existing office ~~space lease for our AAS employees.~~space.

Our cost of FDIC and regulatory fees ~~was flat~~increased by $1.1 million and ~~decreased $0.5~~$2.6 million for the three and ~~nine~~six months ended ~~March~~December 31, 2022, compared to the three and ~~nine month period last year,~~six months ended December 31, 2021, respectively. The ~~decrease~~changes were due to ~~favorable fluctuations~~balance sheet growth and changes in product mix at the ~~Bank’s assessment rate.~~Bank. As an FDIC-insured institution, the Bank is required to pay deposit insurance premiums to the FDIC.

~~Table of Contents~~

Broker-dealer clearing charges ~~increased $0.3~~for the three months ended December 31, 2022 were relatively unchanged from the three months ended December 31, 2021. Broker-dealer clearing charges decreased $1.1 million for the six months ended December 31, 2022 compared to the six months ended December 31, 2021, primarily due to reduced customer trading activity.

General and administrative costs decreased by $1.3 million and ~~$3.3~~increased by $14.1 million for the three and ~~nine~~six months ended ~~March~~December 31, 2022, compared to the three and ~~nine~~six months ended ~~March~~December 31, 2021, respectively. The ~~increases were attributable to the acquisition of AAS and increased clearing charges due to higher activity during the three and nine months ended March 31, 2022.~~

~~Other general and administrative costs increased by $0.5 million and $5.9 million~~decrease for the three ~~and nine~~ months ended ~~March~~December 31, 2022 ~~compared~~was primarily due to ~~the three and nine months ended March 31, 2021, respectively. The increase~~a net benefit for credit losses for unfunded commitments in the three months ended ~~March~~December 31, 2022 as compared to a net provision for the three months ended ~~March~~December 31, ~~2021~~2021. The increase for the six months ended December 31, 2022 was primarily ~~due~~attributable to a ~~$1.0~~$16.0 million ~~provision to the unfunded loan commitment liability. The increase~~accrual in the ~~nine~~first quarter of 2023 as a result of an adverse legal judgement that has not been finalized, partially offset by a net benefit for credit losses for unfunded commitments in the six months ended ~~March~~December 31, 2022 as compared to ~~March~~a net provision for the six months ended December 31, ~~2021 was primarily due to a $4.0 million provision to the unfunded loan commitment liability and increased travel costs of $1.5 million.~~2021.

Provision for Income Taxes

Income tax expense was $35.7 million for the three months ended December 31, 2022 compared to $25.5 million for the three months ended December 31, 2021 and $60.1 million for the six months ended December 31, 2022 compared to $50.3 million for the six months ended December 31, 2021. Our effective income tax rates (income tax provision divided by net income before income tax) for the three months ended ~~March~~December 31, 2022 and 2021 were ~~28.93%~~30.42% and ~~29.46%~~29.59%, respectively. Our effective income tax rates for the ~~nine~~six months ended ~~March~~December 31, 2022 and 2021 were ~~29.21%~~30.04% and ~~29.92%~~29.34%, respectively. ~~The change in effective income tax rates between periods are primarily the result of changes in tax benefits from stock compensation.~~

SEGMENT RESULTS

Our Company determines reportable segments based on what separate financial information is available and what segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance. The Company operates through two operating segments: Banking Business and Securities Business. In order to reconcile the two segments to the unaudited condensed consolidated totals, the Company includes parent-only activities and intercompany eliminations. The following tables present the operating results of the segments:

For the Three Months Ended March 31, 2022
(Dollars in thousands) Banking Business Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 147,828 $ 3,377 $ (1,667) $ 149,538
Provision for credit losses 4,500 — — 4,500
Non-interest income 15,741 15,609 (2,576) 28,774
Non-interest expense 65,076 20,242 1,501 86,819
Income before taxes $ 93,993 $ (1,256) $ (5,744) $ 86,993

For the Three Months Ended March 31, 2021
(Dollars in thousands) Banking Business Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 135,096 $ 3,847 $ (3,274) $ 135,669
Provision for credit losses 2,700 — — 2,700
Non-interest income 16,201 8,369 (683) 23,887
Non-interest expense 64,040 13,282 3,485 80,807
Income before taxes $ 84,557 $ (1,066) $ (7,442) $ 76,049

For the Nine Months Ended March 31, 2022
(Dollars in thousands) Banking Business Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 432,328 $ 14,059 $ (4,639) $ 441,748
Provision for credit losses 12,500 — — 12,500
Non-interest income 46,864 45,169 (5,770) 86,263
Non-interest expense 190,250 61,169 5,850 257,269
Income before taxes $ 276,442 $ (1,941) $ (16,259) $ 258,242

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		For the Nine Months Ended March 31, 2021									For the Three Months Ended December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated		(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	Net interest income	$	390,268	$	13,002	$	(6,182)	$	397,088	Net interest income	$	198,545	$	4,876	$	(3,511)	$	199,910
Provision for credit losses	Provision for credit losses	22,500		—		—		22,500		Provision for credit losses	3,500		—		—		3,500
Non-interest income	Non-interest income	68,708		20,725		(973)		88,460		Non-interest income	10,557		36,004		(18,232)		28,329
Non-interest expense	Non-interest expense	187,733		35,946		8,971		232,650		Non-interest expense	96,284		25,271		(14,027)		107,528
Income before taxes	Income before taxes	$	248,743	$	(2,219)	$	(16,126)	$	230,398	Income before taxes	$	109,318	$	15,609	$	(7,716)	$	117,211


	For the Three Months Ended December 31, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	142,259	$	4,506	$	(1,197)	$	145,568
Provision for credit losses	4,000		—		—		4,000
Non-interest income	16,295		16,454		(1,962)		30,787
Non-interest expense	62,449		21,654		1,916		86,019
Income before taxes	$	92,105	$	(694)	$	(5,075)	$	86,336



	For the Six Months Ended December 31, 2022
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	378,275	$	9,151	$	(7,041)	$	380,385
Provision for credit losses	12,250		—		—		12,250
Non-interest income	21,269		65,169		(30,901)		55,537
Non-interest expense	197,080		49,786		(23,251)		223,615
Income before taxes	$	190,214	$	24,534	$	(14,691)	$	200,057



	For the Six Months Ended December 31, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	284,500	$	10,682	$	(2,972)	$	292,210
Provision for credit losses	8,000		—		—		8,000
Non-interest income	31,123		29,560		(3,194)		57,489
Non-interest expense	125,174		40,927		4,349		170,450
Income before taxes	$	182,449	$	(685)	$	(10,515)	$	171,249

Banking Business

For the three months ended ~~March~~December 31, 2022, our Banking Business segment had income before taxes of ~~$94.0~~$109 million compared to income before taxes of ~~$84.6~~$92.1 million for the three months ended ~~March~~December 31, 2021. For the ~~nine~~six months ended ~~March~~December 31, 2022, wethe Banking Business segment had income before taxes of ~~$276.4~~$190 million compared to income before taxes of ~~$248.7~~$182.4 million for the ~~nine~~six months ended ~~March~~December 31, 2021. For the three and six months ended ~~March~~December 31, ~~2021,~~2022, the increase in income before taxes compared to the three and six months ended December 31, 2021, was mainly due to an increase in net interest income, ~~primarily from a decline in rates of interest-bearing demand and savings deposits and time deposits,~~ partially offset by a decrease in mortgage banking, compared to the three months ended March 31, 2021. For the nine months ended March 31, 2021, the increase in income before taxes was mainly due to an increase in net interest income primarily from a decline in rateshigher non-interest expense and lower non-interest income.

Table of interest-bearing demand and savings deposits and time deposits and a decrease in provision for credit losses, partially offset by a decrease in mortgage banking, compared to the nine months ended March 31, 2021.Contents

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


		At or for the Three Months Ended				At or for the Nine Months Ended					At or for the Three Months Ended				At or for the Six Months Ended
		March 31, 2022		March 31, 2021		March 31, 2022		March 31, 2021			December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Efficiency ratio	Efficiency ratio	39.79	%	42.33	%	39.70	%	40.90	%	Efficiency ratio	46.05	%	39.39	%	49.33	%	39.66	%
Return on average assets	Return on average assets	1.84	%	1.81	%	1.89	%	1.80	%	Return on average assets	1.75	%	1.92	%	1.57	%	1.92	%
Interest rate spread	Interest rate spread	4.06	%	4.05	%	4.17	%	3.90	%	Interest rate spread	3.81	%	4.14	%	3.84	%	4.23	%
Net interest margin	Net interest margin	4.21	%	4.23	%	4.33	%	4.09	%	Net interest margin	4.65	%	4.30	%	4.58	%	4.39	%

Our Banking Business 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 ~~our Parent Company~~Axos Financial, Inc. 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~~borrowings that ~~typically~~particularly decrease net interest margin.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following ~~table presents~~tables present our Banking Business 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 Three Months Ended													For the Three Months Ended
		March 31,													December 31,
		2022						2021							2022						2021
(Dollars in thousands)	(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:	Assets:													Assets:
Loans3, 4	Loans3, 4	$	12,804,231	$	153,363	4.79	%	$	11,556,228	$	147,264	5.10	%	Loans3, 4	$	15,429,873	$	255,309	6.62	%	$	12,076,831	$	148,960	4.93	%
Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions	1,042,552		483		0.19	%	949,259		230		0.10 %		Interest-earning deposits in other financial institutions	1,362,744		13,126		3.85	%	963,533		376		0.16	%
Mortgage-backed and other investment securities4	Mortgage-backed and other investment securities4	185,952		1,661		3.57	%	242,422		2,733		4.51	%	Mortgage-backed and other investment securities4	264,673		3,615		5.46	%	163,417		1,458		3.57	%
Stock of the regulatory agencies	Stock of the regulatory agencies	18,215		258		5.67	%	17,250		212		4.92	%	Stock of the regulatory agencies	18,685		411		8.80	%	17,402		260		5.98	%
Total interest-earning assets	Total interest-earning assets	14,050,950		155,765		4.43	%	12,765,159		150,439		4.71	%	Total interest-earning assets	17,075,975		272,461		6.38	%	13,221,183		151,054		4.57	%
Non-interest-earning assets	Non-interest-earning assets	297,950						161,541						Non-interest-earning assets	341,701						301,502
Total assets	Total assets	$	14,348,900					$	12,926,700					Total assets	$	17,417,676					$	13,522,685
Liabilities and Stockholders’ Equity:	Liabilities and Stockholders’ Equity:													Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	Interest-bearing demand and savings	$	6,999,385	$	3,848	0.22	%	$	7,256,096	$	6,904	0.38	%	Interest-bearing demand and savings	$	10,045,861	$	65,093	2.59	%	$	6,619,803	$	4,316	0.26	%
Time deposits	Time deposits	1,194,452		3,116		1.04	%	1,748,271		7,343		1.68	%	Time deposits	1,146,877		6,321		2.20	%	1,333,848		3,506		1.05	%

Advances from the FHLB	Advances from the FHLB	289,289		973		1.35	%	194,564		992		2.04	%	Advances from the FHLB	290,918		2,504		3.44	%	272,033		973		1.43	%
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	33		—		—	%	120,037		104		0.35 %		Borrowings, subordinated notes and debentures	33		—		—	%	261		—		—	%
Total interest-bearing liabilities	Total interest-bearing liabilities	8,483,159		7,937		0.37	%	9,318,968		15,343		0.66	%	Total interest-bearing liabilities	11,483,689		73,918		2.57	%	8,225,945		8,795		0.43	%
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	4,269,702						2,239,439						Non-interest-bearing demand deposits	4,001,370						3,784,965
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	135,237						119,605						Other non-interest-bearing liabilities	198,916						131,229
Stockholders’ equity	Stockholders’ equity	1,460,802						1,248,688						Stockholders’ equity	1,733,701						1,380,546
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	14,348,900					$	12,926,700					Total liabilities and stockholders’ equity	$	17,417,676					$	13,522,685
Net interest income	Net interest income			$	147,828					$	135,096			Net interest income			$	198,543					$	142,259
Interest rate spread5	Interest rate spread5					4.06	%					4.05	%	Interest rate spread5					3.81	%					4.14	%
Net interest margin6	Net interest margin6					4.21	%					4.23	%	Net interest margin6					4.65	%					4.30	%

1Average balances are obtained from daily data.

2Annualized.

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

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 annualized net interest income as a percentage of average interest-earning assets.

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~~Average Balances, Net Interest Income, Yields Earned and Rates Paid~~

The following table presents our Banking Business 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 Nine Months Ended													For the Six Months Ended
		March 31,													December 31,
		2022						2021							2022						2021
(Dollars in thousands)	(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:	Assets:													Assets:
Loans3, 4	Loans3, 4	$	12,163,066	$	451,166	4.95	%	$	11,234,740	$	434,269	5.15	%	Loans3, 4	$	15,082,455	$	463,319	6.14	%	$	11,849,452	$	297,803	5.03	%
Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions	961,393		1,196		0.17	%	1,245,733		946		0.10 %		Interest-earning deposits in other financial institutions	1,145,975		18,757		3.27	%	921,695		713		0.15	%
Mortgage-backed and other investment securities4	Mortgage-backed and other investment securities4	176,570		4,665		3.52	%	233,946		8,661		4.94	%	Mortgage-backed and other investment securities4	270,324		6,986		5.17	%	171,981		3,004		3.49	%
Stock of the regulatory agencies	Stock of the regulatory agencies	17,811		788		5.90	%	17,250		631		4.88	%	Stock of the regulatory agencies	23,483		829		7.06	%	17,613		530		6.02	%
Total interest-earning assets	Total interest-earning assets	13,318,840		457,815		4.58	%	12,731,669		444,507		4.66	%	Total interest-earning assets	16,522,237		489,891		5.93	%	12,960,741		302,050		4.66	%
Non-interest-earning assets	Non-interest-earning assets	295,401						157,825						Non-interest-earning assets	327,034						294,156
Total assets	Total assets	$	13,614,241					$	12,889,494					Total assets	$	16,849,271					$	13,254,897
Liabilities and Stockholders’ Equity:	Liabilities and Stockholders’ Equity:													Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	Interest-bearing demand and savings	$	6,742,803	$	11,758	0.23	%	$	7,248,839	$	24,413	0.45	%	Interest-bearing demand and savings	$	8,927,706	$	92,833	2.08	%	$	6,617,301	$	7,910	0.24	%
Time deposits	Time deposits	1,297,870		10,767		1.11	%	1,889,983		25,770		1.82	%	Time deposits	1,151,797		11,116		1.93	%	1,348,454		7,651		1.13	%

Advances from the FHLB	Advances from the FHLB	285,547		2,962		1.38	%	224,119		3,690		2.20	%	Advances from the FHLB	585,633		7,667		2.62	%	283,717		1,989		1.40	%
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	113		—		—	%	139,925		366		0.35	%	Borrowings, subordinated notes and debentures	27		—		—	%	152		—		—	%
Total interest-bearing liabilities	Total interest-bearing liabilities	8,326,333		25,487		0.41	%	9,502,866		54,239		0.76	%	Total interest-bearing liabilities	10,665,163		111,616		2.09	%	8,249,624		17,550		0.43	%
Non-interest-bearing demand deposits	Non-interest-bearing demand deposits	3,760,771						2,070,747						Non-interest-bearing demand deposits	4,292,481						3,511,837
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	142,212						127,079						Other non-interest-bearing liabilities	192,094						141,222
Stockholders’ equity	Stockholders’ equity	1,384,925						1,188,802						Stockholders’ equity	1,699,533						1,352,214
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	13,614,241					$	12,889,494					Total liabilities and stockholders’ equity	$	16,849,271					$	13,254,897
Net interest income	Net interest income			$	432,328					$	390,268			Net interest income			$	378,275					$	284,500
Interest rate spread5	Interest rate spread5					4.17	%					3.90	%	Interest rate spread5					3.84	%					4.23	%
Net interest margin6	Net interest margin6					4.33	%					4.09	%	Net interest margin6					4.58	%					4.39	%

1Average balances are obtained from daily data.

2Annualized.

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

4Interest 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. Loans include average balances of $26.5 million and $27.3 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2022 and 2021 nine-month periods, respectively.

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 annualized net interest income as a percentage of average interest-earning assets.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table sets forth the effects of changing rates and volumes on our net interest income for our Banking Business segment. 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.


		For the Three Months Ended						For the Nine Months Ended					For the Three Months Ended								For the Six Months Ended
		March 31,						March 31,					December 31,								December 31,
		2022 vs 2021						2022 vs 2021					2022 vs 2021								2022 vs 2021
		Increase (Decrease) Due to						Increase (Decrease) Due to					Increase (Decrease) Due to								Increase (Decrease) Due to
(Dollars in thousands)	(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)			Volume		Rate			Total Increase (Decrease)		(Dollars in thousands)	Volume		Rate			Total Increase (Decrease)		Volume		Rate		Total Increase (Decrease)
Increase / (decrease) in interest income:	Increase / (decrease) in interest income:															Increase / (decrease) in interest income:
Loans	Loans	$	15,364	$	(9,265)	$	6,099		$	34,423	$	(17,526)		$	16,897	Loans	$	47,590	$	58,759		$	106,349	$	91,506	$	74,010	$	165,516

Interest-earning deposits in other financial institutions	Interest-earning deposits in other financial institutions	25		228		253			(260)		510			250		Interest-earning deposits in other financial institutions	225		12,525			12,750		208		17,836		18,044
Mortgage-backed and other investment securities	Mortgage-backed and other investment securities	(566)		(506)		(1,072)			(1,840)		(2,156)			(3,996)		Mortgage-backed and other investment securities	1,163		994			2,157		2,162		1,820		3,982
Stock of the regulatory agencies, at cost	Stock of the regulatory agencies, at cost	13		33		46			22		135			157		Stock of the regulatory agencies, at cost	20		131			151		197		102		299
		$	14,836	$	(9,510)	$	5,326		$	32,345	$	(19,037)		$	13,308		$	48,998	$	72,409		$	121,407	$	94,073	$	93,768	$	187,841
Increase / (decrease) in interest expense:	Increase / (decrease) in interest expense:															Increase / (decrease) in interest expense:
Interest-bearing demand and savings	Interest-bearing demand and savings	$	(237)	$	(2,819)	$	(3,056)		$	(1,581)	$	(11,074)		$	(12,655)	Interest-bearing demand and savings	$	3,318	$	57,459		$	60,777	$	3,698	$	81,225	$	84,923
Time deposits	Time deposits	(1,919)		(2,308)		(4,227)			(6,682)		(8,321)			(15,003)		Time deposits	(551)		3,366			2,815		(1,251)		4,716		3,465

Advances from the FHLB	Advances from the FHLB	385		(404)		(19)			860		(1,588)			(728)		Advances from the FHLB	73		1,458			1,531		3,121		2,557		5,678
Borrowings, subordinated notes and debentures		(52)		(52)		(104)			(183)		(183)			(366)
		$	(1,823)	$	(5,583)	$	(7,406)		$	(7,586)	$	(21,166)		$	(28,752)
																	$	2,840	$	62,283		$	65,123	$	5,568	$	88,498	$	94,066

The Banking Business segment’s net interest income for the three and ~~nine~~six months ended ~~March~~December 31, 2022 totaled ~~$147.8~~$198.5 million and ~~$432.3~~$378.3 million, an increase of ~~9.4%~~39.6% and an increase of ~~10.8%~~33.0%, compared to net interest income of ~~$135.1~~$142.3 million and ~~$390.3~~$284.5 million for the three and ~~nine~~six months ended ~~March~~December 31, 2021, respectively. The increase for the three and ~~nine~~six months ended ~~March~~December 31, 2022 was primarily due to ~~the reduction in the~~higher average balances and rates ~~paid on interest-bearing demand and savings deposits, and increased interest income due to growth~~earned in the loan portfolio, higher rates on deposits placed with other financial institutions and a higher average balance of non-interest bearing deposits, partially offset by ~~reduced yields~~higher rates paid on ~~interest earning assets.~~deposits.

The Banking Business segment’s non-interest income decreased ~~$0.5~~$5.7 million to ~~$15.7~~$10.6 million and decreased ~~$21.8~~$9.9 million to ~~$46.9~~$21.3 million for the three and ~~nine~~six months ended ~~March~~December 31, 2022 compared to the three and ~~nine~~six months ended ~~March~~December 31, 2021, respectively. The ~~$0.5 million decrease~~decreases for the three and six months ended ~~March~~December 31, 2022 compared to the three and six months ended ~~March~~December 31, 2021, ~~was~~were mainly the result of ~~decreased~~lower mortgage banking income ~~of $3.3 million and partially offset by increases in banking and service fees of $1.6 million~~ and prepayment penalty fee income as higher mortgage rates contributed to lower originations and a reduction in the fair value of $1.5 million. The $21.8 million decrease for the nine months ended March 31, 2022 compared to the nine months ended March 31, 2021, was mainly the result of decreased mortgage banking income of $23.7 millionour MSRs, and decreased banking and service fees of $2.4 million from Emerald Prepaid Mastercard® and Refund Transfer products associated with H&R Block that did not recur for the nine months ended March 31, 2022, partially offset by increases in prepayment penalty fee income of $4.8 million.slower prepayments, respectively.

The Banking Business segment’s non-interest expense for the three and ~~nine~~six months ended ~~March~~December 31, 2022 increased ~~$1.0~~$33.8 million and ~~$2.5~~$71.9 million, respectively, compared to the three and ~~nine~~six months ended ~~March~~December 31, 2021. For the three and six months ended ~~March~~December 31, 2022 the increases compared to the three and six months ended ~~March~~December 31, 2021, were primarily due to higher advertising and promotional expenses, primarily due to amounts paid to our Securities Business segment for non-interest ~~expense increased $1.0 million mainly the~~bearing deposits, higher salaries and related costs as a result of ~~a $1.5 million increase in data processing~~higher headcount and ~~a $1.0 million~~an increase in salaries, and ~~related costs, partially offset by a $1.0 million decrease in depreciation and amortization. For~~for the ~~nine~~six months ended ~~March~~December 31, 2022, ~~compared to~~a $16.0 million accrual in the ~~nine months ended March 31, 2021, the $2.5 million increase was primarily due to~~first quarter of 2023 as a $5.7 million increase in other general and administrative expenses, a $6.2 million increase in data processing expense, and a $3.8 million increase in advertising and promotional expense, partially offset by a $5.4 million decreaseresult of ~~salaries and related expenses, a $2.9 million decrease in professional fees, a $2.4 million decrease in depreciation and amortization, and a $1.1 million decrease in regulatory fees.~~an adverse legal judgement that has not been finalized.

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Securities Business

For the three months ended ~~March~~December 31, 2022, our Securities Business segment had ~~a loss~~income before taxes of ~~$1.3~~$15.6 million compared to a loss before taxes of ~~$1.1~~$0.7 million for the three months ended ~~March~~December 31, 2021. For the ~~nine~~six months ended ~~March~~December 31, 2022, our Securities Business segment had ~~a loss~~income before taxes of ~~$1.9~~$24.5 million compared to a loss before taxes of ~~$2.2~~$0.7 million for the ~~nine~~six months ended ~~March~~December 31, 2021. The increases for both the three and six months ended December 31, 2022 compared to the three and six months ended December 31, 2021 was primarily the result of higher non-interest income, partially offset by higher non-interest expense.

Net interest income for the three months ended ~~March~~December 31, 2022, ~~decreased $0.5~~increased $0.4 million to ~~$3.4~~$4.9 million compared to $4.5 million for the three months ended ~~March~~December 31, ~~2021.~~2021 primarily as a result of higher cash deposit balances and rates. Net interest income for the ~~nine~~six months ended ~~March~~December 31, 2022 ~~increased $1.1~~decreased $1.5 million to ~~$14.1~~$9.2 million compared to $10.7 million for the ~~nine~~six months ended ~~March~~December 31, ~~2021. The changes were~~2021 primarily as a result of ~~fluctuations in the average interest-earning balance of~~lower securities ~~borrowed and margin lending. In the Securities Business, interest is earned through margin loan balances, securities borrowed, and~~lending activity, partially offset by higher cash deposit ~~balances. Interest expense is incurred from cash borrowed through bank lines~~balances and ~~securities lending.~~rates.

Non-interest income ~~during~~for the three months ended ~~March~~December 31, 2022, increased ~~$7.2~~$19.6 million to ~~$15.6~~$36.0 million compared to $16.5 million for the three months ended ~~March~~December 31, 2021. Non-interest income for the six months ended December 31, 2022 increased $35.6 million to $65.2 million compared to $29.6 million for the six months ended December 31, 2021. The increases were primarily ~~$7.7 million attributable to the addition~~a result of ~~AAS custody and mutual funds fees,~~ an increase ~~of $2.3 million~~ in fees earned on ~~FDIC insured~~FDIC-insured bank deposits, ~~partially offset by a decrease of $1.8 million in correspondent fees, and a decrease of $1.2 million of clearing and custodial related fees.~~ including amounts received from our Banking Business segment.

Non-interest ~~income during~~expense for the ~~nine~~three months ended ~~March~~December 31, 2022 increased ~~$24.4~~$3.6 million to ~~$45.2~~$25.3 million compared to $21.7 million for the ~~nine~~three months ended ~~March~~December 31, 2021. Non-interest expense for the six months ended December 31, 2022 increased $8.9 million to $49.8 million compared to $40.9 million for the six months ended December 31, 2021. The increases were primarily ~~$21.1 million~~due to higher headcount and an increase in salaries, and for the six months ended December 31, 2022 the increase was also attributable to ~~the addition~~higher professional services expense.

The following table provides selected information for Axos Clearing LLC as of ~~AAS custody and mutual funds fees, an~~each period indicated:


(Dollars in thousands)	December 31, 2022		June 30, 2022

FDIC insured deposit program balances at banks	$	2,353,167	$	3,452,358
Customer margin balances	$	206,776	$	285,894
Cash reserves for the benefit of customers	$	196,910	$	372,112





Securities lending:
Interest-earning assets – securities borrowed	$	58,846	$	338,980
Interest-bearing liabilities – securities loaned	$	156,008	$	474,400

FINANCIAL CONDITION

Balance Sheet Analysis

Our total assets increased $1.3 billion, or 7.7%, to $18.7 billion, as of December 31, 2022, up from $17.4 billion at June 30, 2022. The increase ~~of $4.3 million~~ in ~~fees earned on FDIC insured bank~~total assets was primarily due to a $1.4 billion increase in loans. Total liabilities increased $1.2 billion, primarily due to a $1.7 billion increase in deposits, partially offset by a $0.3 billion decrease ~~of $0.9 million~~ in ~~correspondent fees, a decrease of $0.6 million of clearing and custodial related fees.~~

Non-interest expense increased $7.0 million to $20.2 million for the three months ended March 31, 2022 from the $13.3 million for the three months ended March 31, 2021. The increase was primarily related to an increase of $3.0 million in salaries and related expenses related to staffing and the acquisition of AAS, an increase of $1.2 million depreciation and amortization expense, an increase of $0.9 million in occupancy and equipment, an increase of $0.7 million in data processing. Non-interest expense increased $25.2 million to $61.2 million for the nine months ended March 31, 2022, from $35.9 million for the nine months ended March 31, 2021. The increase was primarily related to an increase of $12.1 million in salaries and related expenses related to staffing and the acquisition of AAS, an increase of $3.3 million in broker-dealer clearing charges, an increase of $2.9 million depreciation and amortization expense, an increase of $2.5 million in data processing, an increase of $2.0 million occupancy and equipment expense, and an increase of $1.0 million advertising and promotional expense. The increases were primarily the result of the addition of AAS.

~~Selected information concerning the Securities segment follows as of and for the three months ended:~~

March 31,
(Dollars in thousands) 2022 2021
Compensation as a % of net revenue 36.7 % 32.4 %
FDIC insured program balances (end of period) $ 824,494 $ 794,614
Customer margin balances (end of period) $ 294,983 $ 310,695
Customer funds on deposit, including short credits (end of period) $ 250,966 $ 294,903
Clearing:
Total tickets 1,495,617 1,998,293
Correspondents (end of period) 68 64
Securities lending:
Interest-earning assets – stock borrowed (end of period) $ 274,644 $ 543,538
Interest-bearing liabilities – stock loaned (end of period) $ 447,748 $ 649,837
securities loaned.

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~~FINANCIAL CONDITION~~

~~Balance Sheet Analysis~~

Total assets increased $1.8 billion, or 12.7%, to $16.1 billion, as of March 31, 2022, up from $14.3 billion at June 30, 2021. The increase in total assets was mainly due to an increase of $1.7 billion in net loans held for investment, an increase of $211.5 million in cash and cash equivalents, and an increase of $140.7 million in customer, broker-dealer and clearing receivables, partially offset by a decrease of $344.4 million in securities borrowed. Total liabilities increased $1.6 billion, primarily due to growth in deposits of $1.9 billion, partially offset by a decrease of $201.0 million in advances from the FHLB and a decrease of $281.2 million in securities loaned.

Loans

Net loans held for investment increased ~~14.7%~~9.8% to ~~$13.1~~$15.5 billion ~~as of March~~at December 31, 2022 from ~~$11.4~~$14.1 billion at June 30, ~~2021. The increase in the loan portfolio was~~2022 primarily due to ~~growth in demand for commercial real estate~~loan originations of $4.5 billion, partially offset by repayments and ~~C&I loans.~~other changes of $3.1 billion.

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


		March 31, 2022				June 30, 2021					December 31, 2022				June 30, 2022
(Dollars in thousands)	(Dollars in thousands)	Amount		Percent		Amount		Percent		(Dollars in thousands)	Amount		Percent		Amount		Percent
Single Family - Mortgage & Warehouse	Single Family - Mortgage & Warehouse	$	3,972,103	30.0	%	$	4,359,472	37.8	%	Single Family - Mortgage & Warehouse	$	3,988,955	25.5	%	$	3,988,462	28.0	%
Multifamily and Commercial Mortgage	Multifamily and Commercial Mortgage	2,662,517		20.1	%	2,470,454		21.4	%	Multifamily and Commercial Mortgage	3,050,128		19.5	%	2,877,680		20.2	%
Commercial Real Estate	Commercial Real Estate	4,293,032		32.5	%	3,180,453		27.5	%	Commercial Real Estate	5,762,049		36.9	%	4,781,044		33.5	%
Commercial & Industrial - Non-RE	Commercial & Industrial - Non-RE	1,780,545		13.4	%	1,123,869		9.7	%	Commercial & Industrial - Non-RE	2,208,945		14.1	%	2,028,128		14.2	%
Auto & Consumer	Auto & Consumer	521,936		3.9	%	362,180		3.1	%	Auto & Consumer	632,183		4.0	%	567,228		4.0	%
Other	Other	16,125		0.1	%	58,316		0.5	%	Other	7,234		—	%	11,134		0.1	%
Total gross loans	Total gross loans	13,246,258		100.0	%	11,554,744		100.0	%	Total gross loans	15,649,494		100.0	%	14,253,676		100.0	%
Allowance for credit losses - loans	Allowance for credit losses - loans	(143,372)				(132,958)				Allowance for credit losses - loans	(157,218)				(148,617)
Unaccreted discounts and loan fees	Unaccreted discounts and loan fees	(9,283)				(6,972)				Unaccreted discounts and loan fees	(19,064)				(13,998)
Total net loans	Total net loans	$	13,093,603			$	11,414,814			Total net loans	$	15,473,212			$	14,091,061

The Bank originates some single family interest only loans with terms that include repayments that are less than the repayments for fully amortizing loans. 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~~loan-to-values (“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 Bank monitors and performs reviews of interest only ~~loans.~~loans as part of its loan portfolio management process. 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 ~~March~~December 31, 2022, the Company had ~~$1.1~~$1.3 billion of interest only mortgage ~~loans.~~

~~Table~~loans with a weighted average LTV of ~~Contents~~

58.5%.

Asset Quality and Allowance for ~~Loan and Lease~~Credit Losses - Loans

Non-performing Assets

Non-performing loans are comprised of ~~loans~~those past due 90 days or more ~~on nonaccrual status~~ and other nonaccrual loans. Non-performing assets include non-performing loans plus other real estate owned and repossessed vehicles. At ~~March~~December 31, 2022, our non-performing loans totaled ~~$138.8~~$95.0 million, or ~~1.05%~~0.61% of total gross loans and our total non-performing assets totaled $100.8 million, or 0.54% of total assets.

Non-performing loans and foreclosed assets or “non-performing assets” ~~totaled $139.3 million, or 0.87% of total assets.~~

~~Non-performing assets~~ consisted of the following as of the dates indicated:


(Dollars in thousands)	(Dollars in thousands)	March 31, 2022			June 30, 2021			Inc (Dec)			(Dollars in thousands)	December 31, 2022			June 30, 2022			Inc (Dec)
Non-performing assets:	Non-performing assets:										Non-performing assets:
Non-accrual loans and leases:
Non-accrual loans:											Non-accrual loans:
Single Family - Mortgage & Warehouse	Single Family - Mortgage & Warehouse	$	113,317		$	105,708		$	7,609		Single Family - Mortgage & Warehouse	$	39,043		$	66,424		$	(27,381)
Multifamily and Commercial Mortgage	Multifamily and Commercial Mortgage	9,667			20,428			(10,761)			Multifamily and Commercial Mortgage	35,275			33,410			1,865
Commercial Real Estate	Commercial Real Estate	14,952			15,839			(887)			Commercial Real Estate	14,852			14,852			—
Commercial & Industrial - Non-RE	Commercial & Industrial - Non-RE	—			2,942			(2,942)			Commercial & Industrial - Non-RE	2,989			2,989			—
Auto & Consumer	Auto & Consumer	446			278			168			Auto & Consumer	1,447			439			1,008
Other	Other	372			—			372			Other	1,382			80			1,302
Total non-performing loans	Total non-performing loans	138,754			145,195			(6,441)			Total non-performing loans	94,988			118,194			(23,206)
Foreclosed real estate	Foreclosed real estate	—			6,547			(6,547)			Foreclosed real estate	4,383			—			4,383
Repossessed—Auto and RV		564			235			329
Repossessed—Autos											Repossessed—Autos	1,421			798			623
Total non-performing assets	Total non-performing assets	$	139,318		$	151,977		$	(12,659)		Total non-performing assets	$	100,792		$	118,992		$	(18,200)
Total non-performing loans as a percentage of total loans	Total non-performing loans as a percentage of total loans	1.05		%	1.26		%	(0.21)		%	Total non-performing loans as a percentage of total loans	0.61		%	0.83		%	(0.22)		%
Total non-performing assets as a percentage of total assets	Total non-performing assets as a percentage of total assets	0.87		%	1.07		%	(0.20)		%	Total non-performing assets as a percentage of total assets	0.54		%	0.68		%	(0.14)		%

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Total non-performing assets decreased from ~~$152.0~~$119.0 million at June 30, ~~2021~~2022 to ~~$139.3~~$100.8 million at ~~March~~December 31, 2022. The decrease in non-performing assets ~~of approximately $12.7 million,~~ was primarily attributable to ~~resolutions of multifamily, C&I - non-RE, and foreclosed real estate~~a decrease in response to improved macro economic factors. Non-performing single-family loans increased by $7.6 million. The Company ended COVID-19 related forbearance for all single family mortgage borrowers during the quarter ended September 30, 2020. Any forbearance granted out of COVID-19 was for six months or less. The weighted-average LTV of the non-performingnon-accrual single family mortgage loans, partially offset by an increase in other non-performing loans and foreclosed real estate. The weighted average LTV of the single family mortgage loans remaining on non-accrual at December 31, 2022 was ~~57.2% as of March 31, 2022.~~59.8%.

The Bank had no performing troubled debt restructurings as of ~~March~~December 31, 2022 and June 30, ~~2021.~~2022. A troubled debt restructuring is a concession made to a borrower experiencing financial difficulties, typically permanent or temporary modifications of principal and interest payments or an extension of maturity dates. When a loan is delinquent and classified as a troubled debt restructuring, no interest is accrued until the borrower demonstrates over time (typically six months) that it can make payments. When a loan is considered a troubled debt restructuring and is on nonaccrual, it is considered non-performing and included in the table above.

~~Table~~Management establishes an allowance for credit losses based upon its evaluation of ~~Contents~~

the expected life-time credit losses related to the amortized cost basis of loans on the balance sheet. For additional information regarding the Company’s allowance for credit losses see Note 5 - Loans and Allowance for Credit Losses ~~- Loans~~

~~On July 1, 2020,~~in the ~~Company adopted ASC 326. The update replaces the historical incurred loss model to~~condensed consolidated financial statements. For a ~~current expected loss model, resulting, generally, in earlier recognition of loss. Refer to~~ ~~Note 1 - Summary of Significant Accounting Policies~~ ~~in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for greater detail on the accounting adoption along with detail~~discussion of the ~~processes and approaches involved in determining the allowance for credit losses under the new guidance.~~

~~The following table reflects management’s allocation of the allowance for credit losses - loans by loan category and the ratio of each loan category to total loans as of the dates indicated:~~

March 31, 2022 June 30, 2021
(Dollars in thousands) Amount
of
Allowance Allocation
as a % of
Allowance Amount
of
Allowance Allocation
as a % of
Allowance
Single Family Real Estate $ 21,789 15.2 % $ 26,604 20.0 %
Multifamily Real Estate 13,818 9.7 % 13,146 9.9 %
Commercial Real Estate 69,829 48.7 % 57,928 43.6 %
Commercial and Industrial - Non-RE 26,268 18.3 % 28,460 21.4 %
Consumer and Auto 11,623 8.1 % 6,519 4.9 %
Other 45 — % 301 0.2 %
Total $ 143,372 100.0 % $ 132,958 100.0 %

~~The~~ provision for credit losses ~~was $4.5 million~~ for the three and six months ended ~~March~~December 31, 2022, ~~compared to $2.7 million~~see “Results of Operations—Provision for the three months ended March 31, 2021. The provision for credit losses was $12.5 million for the nine months ended March 31, 2022 compared to $22.5 million for the nine months ended March 31, 2021. The increase in the provision for the three months ended March 31, 2022 was due to growth in the loan portfolio. The decrease in the provision for the nine months ended March 31, 2022 was due to favorable changes in economic and business conditions resulting from reduced levels of disruptions from the COVID-19 pandemic between March 31, 2021 and March 31, 2022, partially offset by loan growth and changes in loan mix.Credit Losses.” We believe that the lower average LTV in the Bank’s mortgage loan portfolio will continue to result in future lower average mortgage loan charge-offs when compared to many other comparable banks. ~~The~~We do not expect the resolution of the Bank’s existing other real estate owned and non-performing loans ~~should not~~will have a significant adverse impact on our operating results.

Investment Securities

Total investment securities ~~were $229.9~~was $248.4 million as of ~~March~~December 31, 2022, compared with ~~$189.3~~$264.3 million at June 30, ~~2021.~~2022. During the ~~nine~~six months ended ~~March~~December 31, 2022, we ~~purchased~~did not purchase any securities ~~for $107.3 million~~ and received principal repayments of approximately ~~$59.5~~$9.1 million in our available-for-sale portfolio. The remainder of the change for the available-for-sale portfolio is attributable to unrealized losses, accretion and other ~~activities.~~

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changes.

Deposits

Deposits increased ~~a net $1.9~~by $1.7 billion, or ~~17.7%~~12.5%, to ~~$12.7~~$15.7 billion at ~~March~~December 31, 2022, from ~~$10.8~~$13.9 billion at June 30, ~~2021.~~2022. Interest-bearing demand and savings increased $3.3 billion and time deposits increased $21.9 million. Non-interest bearing deposits ~~increased $1.7~~decreased $1.6 billion, or ~~67.1%~~31.6%, to ~~$4.1~~$3.4 billion at ~~March~~December 31, 2022, from $5.0 billion at June 30, ~~2021, primarily due to deposits provided by the AAS acquisition. Time deposits decreased $471.4 million as higher costing time deposits were run off.~~2022.

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


		March 31, 2022				June 30, 2021					December 31, 2022				June 30, 2022
(Dollars in thousands)	(Dollars in thousands)	Amount		Rate1		Amount		Rate1		(Dollars in thousands)	Amount		Rate1		Amount		Rate1
Non-interest bearing	Non-interest bearing	$	4,135,278	—	%	$	2,474,424	—	%	Non-interest bearing	$	3,442,148	—	%	$	5,033,970	—	%
Interest bearing:	Interest bearing:									Interest bearing:
Demand	Demand	4,247,543		0.19	%	3,369,845		0.15	%	Demand	5,661,863		3.03	%	3,611,889		0.61	%
Savings	Savings	3,308,736		0.23	%	3,458,687		0.21	%	Savings	5,509,620		2.93	%	4,245,555		0.95	%
Total interest-bearing demand and savings	Total interest-bearing demand and savings	7,556,279		0.21	%	6,828,532		0.18	%	Total interest-bearing demand and savings	11,171,483		2.98	%	7,857,444		0.79	%
Time deposits:	Time deposits:									Time deposits:
$250 and under2	$250 and under2	726,161		1.19	%	1,070,139		1.30	%	$250 and under2	688,524		1.85	%	651,392		1.22	%
Greater than $250	Greater than $250	315,284		0.61	%	442,702		1.03	%	Greater than $250	388,339		3.50	%	403,616		1.41	%
Total time deposits	Total time deposits	1,041,445		1.02	%	1,512,841		1.22	%	Total time deposits	1,076,863		2.41	%	1,055,008		1.25	%
Total interest bearing2	Total interest bearing2	8,597,724		0.31	%	8,341,373		0.37	%	Total interest bearing2	12,248,346		2.93	%	8,912,452		0.85	%
Total deposits	Total deposits	$	12,733,002	0.21	%	$	10,815,797	0.29	%	Total deposits	$	15,690,494	2.29	%	$	13,946,422	0.54	%

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

2 The total interest bearing includes brokered deposits of ~~$803.0~~$2,508.8 million and ~~$621.4~~$1,032.7 million as of ~~March~~December 31, 2022 and June 30, ~~2021,~~2022, respectively, of which ~~$250.0~~$399.9 million and ~~$380.0~~$250.0 million, respectively, are time deposits classified as $250 and under.

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

March 31, 2022 June 30, 2021 March 31, 2021
Non-interest bearing, prepaid and other 40,958 36,726 33,442
Checking and savings accounts 344,176 336,068 326,536
Time deposits 9,313 12,815 14,430
Total number of deposit accounts 394,447 385,609 374,408


	December 31, 2022	June 30, 2022	December 31, 2021
Non-interest bearing	43,747	42,372	39,698
Interest-bearing checking and savings accounts	365,714	344,593	342,127
Time deposits	7,475	8,734	10,234
Total number of accounts	416,936	395,699	392,059

Total deposits that exceeded the FDIC insurance limit of $250,000 at December 31, 2022 and June 30, 2022 were $2.0 billion and $2.3 billion, respectively. The maturities of certificates of deposit that exceeded the FDIC insurance limit of $250,000 at December 31, 2022 were as follows:


(Dollars in thousands)	December 31, 2022
3 months or less	$	5,772
3 months to 6 months	1,829
6 months to 12 months	6,222
Over 12 months	11,780
Total	$	25,603

Borrowings

The following table sets forth the composition of our borrowings and the interest rates at the dates indicated:


		March 31, 2022				June 30, 2021				March 31, 2021					December 31, 2022				June 30, 2022				December 31, 2021
(Dollars in thousands)	(Dollars in thousands)	Balance		Weighted Average Rate		Balance		Weighted Average Rate		Balance		Weighted Average Rate		(Dollars in thousands)	Balance		Weighted Average Rate		Balance		Weighted Average Rate		Balance		Weighted Average Rate

FHLB Advances	FHLB Advances	$152,500		2.30	%	$353,500		1.18	%	$172,500		2.26	%	FHLB Advances	$100,000		2.26	%	$117,500		2.26	%	$157,500		2.29	%
Borrowings, subordinated notes and debentures	Borrowings, subordinated notes and debentures	381,682		4.54	%	221,358		4.68 %		365,753		3.23	%	Borrowings, subordinated notes and debentures	334,077		4.59	%	445,244		3.86	%	260,435		4.37	%
Total borrowings	Total borrowings	$534,182		3.90	%	$574,858		2.53	%	$538,253		2.92	%	Total borrowings	$434,077		4.05	%	$562,744		3.53	%	$417,935		3.59	%

Weighted average cost of borrowings during the quarter	Weighted average cost of borrowings during the quarter	2.44	%			2.93	%			3.63	%			Weighted average cost of borrowings during the quarter	4.36	%			2.85	%			2.64	%
Borrowings as a percent of total assets	Borrowings as a percent of total assets	3.32	%			4.03	%			3.63	%			Borrowings as a percent of total assets	2.32	%			3.23	%			2.69	%

At ~~March~~December 31, 2022, total borrowings amounted to ~~$534.2~~$434.1 million, down ~~$40.7~~$128.7 million, or ~~7.1%~~22.9%, from June 30, ~~2021~~2022 and ~~down $4.1~~up $16.1 million or ~~0.8%~~3.9% from ~~March~~December 31, 2021. Borrowings as a percent of total assets were ~~3.32%~~2.32%, ~~4.03%~~3.23% and ~~3.63%~~2.69% at ~~March~~December 31, 2022, June 30, ~~2021~~2022 and ~~March~~December 31, 2021, respectively. Weighted average cost of borrowings during the quarter were ~~2.44%~~4.36%, ~~2.93%~~2.85% and ~~3.63%~~2.64% for the quarters ended ~~March~~December 31, 2022, June 30, ~~2021~~2022 and ~~March~~December 31, 2021, respectively.

~~Table of Contents~~

We regularly use advances from the FHLB to manage our interest rate risk and, to a lesser extent, manage our liquidity position. Generally, FHLB advances with terms between three and ten years have been used to fund the purchase of single family and multifamily mortgages and to provide us with interest rate risk protection should rates rise.

Stockholders’ Equity

Stockholders’ equity increased ~~$184.6~~$144.6 million to ~~$1,585.6~~$1,787.6 million at ~~March~~December 31, 2022 compared to ~~$1,400.9~~$1,643.0 million at June 30, ~~2021.~~2022. The increase was the result of ~~our~~ net income for the ~~nine~~six months ended ~~March~~December 31, 2022 of ~~$182.8~~$140.0 million and stock compensation expense and restricted stock unit vesting which combined for an increase of ~~$6.0~~$8.6 million, partially offset by a ~~$4.1~~$4.0 million decrease in accumulated other comprehensive income, net of tax.

During the three and ~~nine~~six months ended ~~March~~December 31, 2022, the Company did not repurchase any common stock shares. The Company has $52.8 million remaining under the Board authorized stock repurchase ~~program.~~program as of December 31, 2022.

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~~LIQUIDITY~~Banking Business

~~Cash flow information is as follows:~~

For the Nine Months Ended
March 31,
(Dollars in thousands) 2022 2021
Operating Activities $ 65,210 $ 312,727
Investing Activities $ (1,719,834) $ (1,126,045)
Financing Activities $ 1,866,161 $ 305,754

~~During~~For the ~~nine~~three months ended ~~March~~December 31, 2022, weour Banking Business segment had ~~net cash inflows from operating activities~~income before taxes of ~~$65.2~~$109 million compared to ~~inflows~~income before taxes of ~~$312.7~~$92.1 million for the ~~nine~~three months ended ~~March~~December 31, ~~2021, primarily due~~2021. For the six months ended December 31, 2022, the Banking Business segment had income before taxes of $190 million compared to ~~net~~ income ~~for each period. Net operating cash inflows and outflows fluctuate primarily due to the timing~~before taxes of the following: originations of loans held for sale, proceeds from loan sales, securities borrowed and loaned, and customer, broker-dealer and clearing receivables and payables, and changes in other assets and payables were the primary drivers.

~~Net cash outflows from investing activities totaled $1,719.8~~$182.4 million for the ~~nine~~six months ended ~~March~~December 31, 2021. For the three and six months ended December 31, 2022, ~~while outflows totaled $1,126.0 million for~~ the ~~nine~~increase in income before taxes compared to the three and six months ended ~~March~~December 31, ~~2021. The~~2021, was mainly due to an increase in ~~outflows was primarily due to increased originations of loans~~net interest income, partially offset by ~~increased repayments on loans~~higher non-interest expense and ~~the $54.8 million acquisition of AAS.~~

Net cash inflows from financing activities totaled $1,866.2 million for the nine months ended March 31, 2022, compared to net cash outflows from financing activities of $305.8 million for the nine months ended March 31, 2021. The primary driver behind the increase in net cash inflows was increased deposits provided in part, by the acquisition of AAS and by the net proceeds of $148.1 million of subordinated notes in the nine months ended March 31, 2022.

During the nine months ended March 31, 2022, the Bank could borrow up to 40.0% of its total assets from the FHLB. Borrowings are collateralized by the pledge of certain mortgage loans and investment securities to the FHLB. At March 31, 2022, the Company had $1,562.2 million available immediately and $2,783.9 million available with additional collateral. At March 31, 2022, we also had two unsecured federal funds purchase lines with two different banks totaling $175.0 million, under which no borrowings were outstanding.

The Bank has the ability to borrow short-term from the Federal Reserve Bank of San Francisco Discount Window. At March 31, 2022, the Bank did not have any borrowings outstanding and the amount available from this source was $2,800.6 million. The credit line is collateralized by consumer loans and mortgage-backed securities.

Axos Clearing has a total of $170.0 million in uncommitted secured lines of credit for borrowing as needed. As of March 31, 2022, there was $18.0 million outstanding. These credit facilities bear interest at rates based on the Federal Funds rate and are due upon demand.

Axos Clearing has a $75.0 million committed unsecured line of credit available for limited purpose borrowing. As of March 31, 2022, there was $30.0 million outstanding on this credit facility. This credit facility bears interest at rates based on the Federal Funds rate and are due upon demand.

We believe our liquidity sources to be stable and adequate for our anticipated needs and contingencies for the next 12 months and beyond. We believe we have the ability to increase our level of deposits and borrowings to address our liquidity needs for the foreseeable future.lower non-interest income.

5140

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~~OFF-BALANCE SHEET COMMITMENTS~~We consider the ratios shown in the table below to be key indicators of the performance of our Banking Business segment:

~~At March~~


	At or for the Three Months Ended				At or for the Six Months Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Efficiency ratio	46.05	%	39.39	%	49.33	%	39.66	%
Return on average assets	1.75	%	1.92	%	1.57	%	1.92	%
Interest rate spread	3.81	%	4.14	%	3.84	%	4.23	%
Net interest margin	4.65	%	4.30	%	4.58	%	4.39	%

Our Banking Business 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 Axos Financial, Inc. 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 borrowings that particularly decrease net interest margin.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following tables present our Banking Business 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 Three Months Ended
	December 31,
	2022						2021
(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:
Loans3, 4	$	15,429,873	$	255,309	6.62	%	$	12,076,831	$	148,960	4.93	%
Interest-earning deposits in other financial institutions	1,362,744		13,126		3.85	%	963,533		376		0.16	%
Mortgage-backed and other investment securities4	264,673		3,615		5.46	%	163,417		1,458		3.57	%
Stock of the regulatory agencies	18,685		411		8.80	%	17,402		260		5.98	%
Total interest-earning assets	17,075,975		272,461		6.38	%	13,221,183		151,054		4.57	%
Non-interest-earning assets	341,701						301,502
Total assets	$	17,417,676					$	13,522,685
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	10,045,861	$	65,093	2.59	%	$	6,619,803	$	4,316	0.26	%
Time deposits	1,146,877		6,321		2.20	%	1,333,848		3,506		1.05	%

Advances from the FHLB	290,918		2,504		3.44	%	272,033		973		1.43	%
Borrowings, subordinated notes and debentures	33		—		—	%	261		—		—	%
Total interest-bearing liabilities	11,483,689		73,918		2.57	%	8,225,945		8,795		0.43	%
Non-interest-bearing demand deposits	4,001,370						3,784,965
Other non-interest-bearing liabilities	198,916						131,229
Stockholders’ equity	1,733,701						1,380,546
Total liabilities and stockholders’ equity	$	17,417,676					$	13,522,685
Net interest income			$	198,543					$	142,259
Interest rate spread5					3.81	%					4.14	%
Net interest margin6					4.65	%					4.30	%

1Average balances are obtained from daily data.

2Annualized.

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

4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees.

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 annualized net interest income as a percentage of average interest-earning assets.

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	For the Six Months Ended
	December 31,
	2022						2021
(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:
Loans3, 4	$	15,082,455	$	463,319	6.14	%	$	11,849,452	$	297,803	5.03	%
Interest-earning deposits in other financial institutions	1,145,975		18,757		3.27	%	921,695		713		0.15	%
Mortgage-backed and other investment securities4	270,324		6,986		5.17	%	171,981		3,004		3.49	%
Stock of the regulatory agencies	23,483		829		7.06	%	17,613		530		6.02	%
Total interest-earning assets	16,522,237		489,891		5.93	%	12,960,741		302,050		4.66	%
Non-interest-earning assets	327,034						294,156
Total assets	$	16,849,271					$	13,254,897
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	8,927,706	$	92,833	2.08	%	$	6,617,301	$	7,910	0.24	%
Time deposits	1,151,797		11,116		1.93	%	1,348,454		7,651		1.13	%

Advances from the FHLB	585,633		7,667		2.62	%	283,717		1,989		1.40	%
Borrowings, subordinated notes and debentures	27		—		—	%	152		—		—	%
Total interest-bearing liabilities	10,665,163		111,616		2.09	%	8,249,624		17,550		0.43	%
Non-interest-bearing demand deposits	4,292,481						3,511,837
Other non-interest-bearing liabilities	192,094						141,222
Stockholders’ equity	1,699,533						1,352,214
Total liabilities and stockholders’ equity	$	16,849,271					$	13,254,897
Net interest income			$	378,275					$	284,500
Interest rate spread5					3.84	%					4.23	%
Net interest margin6					4.58	%					4.39	%

1Average balances are obtained from daily data.

2Annualized.

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

4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees.

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 annualized net interest income as a percentage of average interest-earning assets.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid


	For the Three Months Ended						For the Six Months Ended
	December 31,						December 31,
	2022 vs 2021						2022 vs 2021
	Increase (Decrease) Due to						Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)			Volume		Rate		Total Increase (Decrease)
Increase / (decrease) in interest income:
Loans	$	47,590	$	58,759	$	106,349		$	91,506	$	74,010	$	165,516

Interest-earning deposits in other financial institutions	225		12,525		12,750			208		17,836		18,044
Mortgage-backed and other investment securities	1,163		994		2,157			2,162		1,820		3,982
Stock of the regulatory agencies, at cost	20		131		151			197		102		299
	$	48,998	$	72,409	$	121,407		$	94,073	$	93,768	$	187,841
Increase / (decrease) in interest expense:
Interest-bearing demand and savings	$	3,318	$	57,459	$	60,777		$	3,698	$	81,225	$	84,923
Time deposits	(551)		3,366		2,815			(1,251)		4,716		3,465

Advances from the FHLB	73		1,458		1,531			3,121		2,557		5,678

	$	2,840	$	62,283	$	65,123		$	5,568	$	88,498	$	94,066

The Banking Business segment’s net interest income for the three and six months ended December 31, 2022 ~~we had commitments~~totaled $198.5 million and $378.3 million, an increase of 39.6% and an increase of 33.0%, compared to ~~originate loans~~net interest income of $142.3 million and $284.5 million for the three and six months ended December 31, 2021, respectively. The increase for the three and six months ended December 31, 2022 was primarily due to higher average balances and rates earned in the loan portfolio, higher rates on deposits placed with ~~an aggregate outstanding principal~~other financial institutions and a higher average balance of ~~$2,820.3~~non-interest bearing deposits, partially offset by higher rates paid on deposits.

The Banking Business segment’s non-interest income decreased $5.7 million to $10.6 million and ~~commitments~~decreased $9.9 million to ~~sell loans with an aggregate outstanding principal balance of $33.0 million. We have no commitments to purchase loans, investment securities or any other unused lines of credit.~~

~~At March~~$21.3 million for the three and six months ended December 31, 2022 ~~we had~~compared to the three and six months ended December 31, 2021, respectively. The decreases for the three and six months ended December 31, 2022 compared to the three and six months ended December 31, 2021, were mainly the result of lower mortgage banking income and prepayment penalty fee income as higher mortgage rates contributed to lower originations and a ~~commitment to fund an equity investment measured at~~reduction in the fair value of ~~$10 million. At March~~our MSRs, and slower prepayments, respectively.

The Banking Business segment’s non-interest expense for the three and six months ended December 31, 2022 increased $33.8 million and $71.9 million, respectively, compared to the three and six months ended December 31, 2021. For the three and six months ended December 31, 2022 the increases compared to the three and six months ended December 31, 2021, were primarily due to higher advertising and promotional expenses, primarily due to amounts paid to our Securities Business segment for non-interest bearing deposits, higher salaries and related costs as a result of higher headcount and an increase in salaries, and for the six months ended December 31, 2022, a $16.0 million accrual in the first quarter of 2023 as a result of an adverse legal judgement that has not been finalized.

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Securities Business

For the three months ended December 31, 2022, our Securities Business segment had income before taxes of $15.6 million compared to a loss before taxes of $0.7 million for the three months ended December 31, 2021. For the six months ended December 31, 2022, our Securities Business segment had income before taxes of $24.5 million compared to a loss before taxes of $0.7 million for the six months ended December 31, 2021. The increases for both the three and six months ended December 31, 2022 compared to the three and six months ended December 31, 2021 was primarily the result of higher non-interest income, partially offset by higher non-interest expense.

Net interest income for the three months ended December 31, 2022, increased $0.4 million to $4.9 million compared to $4.5 million for the three months ended December 31, 2021 primarily as a result of higher cash deposit balances and rates. Net interest income for the six months ended December 31, 2022 decreased $1.5 million to $9.2 million compared to $10.7 million for the six months ended December 31, 2021 primarily as a result of lower securities lending activity, partially offset by higher cash deposit balances and rates.

Non-interest income for the three months ended December 31, 2022, increased $19.6 million to $36.0 million compared to $16.5 million for the three months ended December 31, 2021. Non-interest income for the six months ended December 31, 2022 increased $35.6 million to $65.2 million compared to $29.6 million for the six months ended December 31, 2021. The increases were primarily a result of an increase in fees earned on FDIC-insured bank deposits, including amounts received from our Banking Business segment.

Non-interest expense for the three months ended December 31, 2022 increased $3.6 million to $25.3 million compared to $21.7 million for the three months ended December 31, 2021. Non-interest expense for the six months ended December 31, 2022 increased $8.9 million to $49.8 million compared to $40.9 million for the six months ended December 31, 2021. The increases were primarily due to higher headcount and an increase in salaries, and for the six months ended December 31, 2022 the increase was also attributable to higher professional services expense.

The following table provides selected information for Axos Clearing LLC as of each period indicated:


(Dollars in thousands)	December 31, 2022		June 30, 2022

FDIC insured deposit program balances at banks	$	2,353,167	$	3,452,358
Customer margin balances	$	206,776	$	285,894
Cash reserves for the benefit of customers	$	196,910	$	372,112





Securities lending:
Interest-earning assets – securities borrowed	$	58,846	$	338,980
Interest-bearing liabilities – securities loaned	$	156,008	$	474,400

FINANCIAL CONDITION

Balance Sheet Analysis

Our total assets increased $1.3 billion, or 7.7%, to $18.7 billion, as of December 31, 2022, up from $17.4 billion at June 30, 2022. The increase in total assets was primarily due to a $1.4 billion increase in loans. Total liabilities increased $1.2 billion, primarily due to a $1.7 billion increase in deposits, partially offset by a $0.3 billion decrease in securities loaned.

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Loans

Net loans held for investment increased 9.8% to $15.5 billion at December 31, 2022 from $14.1 billion at June 30, 2022 primarily due to loan originations of $4.5 billion, partially offset by repayments and other changes of $3.1 billion.

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


	December 31, 2022				June 30, 2022
(Dollars in thousands)	Amount		Percent		Amount		Percent
Single Family - Mortgage & Warehouse	$	3,988,955	25.5	%	$	3,988,462	28.0	%
Multifamily and Commercial Mortgage	3,050,128		19.5	%	2,877,680		20.2	%
Commercial Real Estate	5,762,049		36.9	%	4,781,044		33.5	%
Commercial & Industrial - Non-RE	2,208,945		14.1	%	2,028,128		14.2	%
Auto & Consumer	632,183		4.0	%	567,228		4.0	%
Other	7,234		—	%	11,134		0.1	%
Total gross loans	15,649,494		100.0	%	14,253,676		100.0	%
Allowance for credit losses - loans	(157,218)				(148,617)
Unaccreted discounts and loan fees	(19,064)				(13,998)
Total net loans	$	15,473,212			$	14,091,061

The Bank originates some single family interest only loans with terms that include repayments that are less than the repayments for fully amortizing loans. 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 loan-to-values (“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 Bank monitors and performs reviews of interest only loans as part of its loan portfolio management process. 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 December 31, 2022, the Company had $1.3 billion of interest only mortgage loans with a weighted average LTV of 58.5%.

Asset Quality and Allowance for Credit Losses - Loans

Non-performing Assets

Non-performing loans are comprised of those past due 90 days or more and other nonaccrual loans. Non-performing assets include non-performing loans plus other real estate owned and repossessed vehicles. At December 31, 2022, our non-performing loans totaled $95.0 million, or 0.61% of total gross loans and our total non-performing assets totaled $100.8 million, or 0.54% of total assets.

Non-performing loans and foreclosed assets or “non-performing assets” consisted of the following as of the dates indicated:


(Dollars in thousands)	December 31, 2022			June 30, 2022			Inc (Dec)
Non-performing assets:
Non-accrual loans:
Single Family - Mortgage & Warehouse	$	39,043		$	66,424		$	(27,381)
Multifamily and Commercial Mortgage	35,275			33,410			1,865
Commercial Real Estate	14,852			14,852			—
Commercial & Industrial - Non-RE	2,989			2,989			—
Auto & Consumer	1,447			439			1,008
Other	1,382			80			1,302
Total non-performing loans	94,988			118,194			(23,206)
Foreclosed real estate	4,383			—			4,383
Repossessed—Autos	1,421			798			623
Total non-performing assets	$	100,792		$	118,992		$	(18,200)
Total non-performing loans as a percentage of total loans	0.61		%	0.83		%	(0.22)		%
Total non-performing assets as a percentage of total assets	0.54		%	0.68		%	(0.14)		%

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Total non-performing assets decreased from $119.0 million at June 30, 2022 to $100.8 million at December 31, 2022. The decrease in non-performing assets was primarily attributable to a decrease in non-accrual single family mortgage loans, partially offset by an increase in other non-performing loans and foreclosed real estate. The weighted average LTV of the single family mortgage loans remaining on non-accrual at December 31, 2022 was 59.8%.

The Bank had no ~~amounts had been funded~~performing troubled debt restructurings as of December 31, 2022 and June 30, 2022. A troubled debt restructuring is a concession made to a borrower experiencing financial difficulties, typically permanent or temporary modifications of principal and interest payments or an extension of maturity dates. When a loan is delinquent and classified as a troubled debt restructuring, no interest is accrued until the borrower demonstrates over time (typically six months) that it can make payments. When a loan is considered a troubled debt restructuring and is on nonaccrual, it is considered non-performing and included in the table above.

Management establishes an allowance for credit losses based upon its evaluation of the expected life-time credit losses related to the ~~investment.~~

Inamortized cost basis of loans on the ~~normal course of business, Axos Clearing’s customer activities involve~~balance sheet. For additional information regarding the ~~execution, settlement,~~Company’s allowance for credit losses see Note 5 - Loans and ~~financing of various customer securities transactions. These activities may expose Axos Clearing to off-balance-sheet risk~~Allowance for Credit Losses in the event the customer or other broker is unable to fulfill its contracted obligations and Axos Clearing has to purchase or sell the financial instrument underlying the contract at a loss. Axos Clearing’s clearing agreements with broker-dealers for which it provides clearing services requires them to indemnify Axos Clearing if customers fail to satisfy their contractual obligation.

~~CAPITAL RESOURCES AND REQUIREMENTS~~

Our Company and Bank are subject to regulatory capital adequacy requirements promulgated by federal bank regulatory agencies. Failure by our Company or Bank to meet minimum capital requirements could result in certain mandatory and discretionary actions by regulators that could have a material adverse effect on our unaudited condensed consolidated financial statements. The Federal Reserve establishes capital requirements for our Company and the OCC has similar requirements for our Bank. The following tables present regulatory capital information for our Company and Bank. Information presented for March 31, 2022, reflects the Basel III capital requirements that became effective January 1, 2015 for both our Company and Bank. Under these capital requirements and the regulatory framework for prompt corrective action, our Company and Bank must meet specific capital guidelines that involve quantitative measures of our Company and Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Our Company’s and Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors.

Quantitative measures established by regulation require our Company and Bank to maintain certain minimum capital amounts and ratios. Federal bank regulators require our Company and Bank maintain minimum ratios of core capital to adjusted average assets of 4.0%, common equity tier 1 capital to risk-weighted assets of 4.5%, tier 1 capital to risk-weighted assets of 6.0% and total risk-based capital to risk-weighted assets of 8.0%. To be “well capitalized,” our Company and Bank must maintain minimum leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios of at least 5.0%, 6.5%, 8.0% and 10.0%, respectively. At March 31, 2022, our Company and Bank met all the capital adequacy requirements to which they were subject and were “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since March 31, 2022 that would materially adversely change the Company’s and Bank’s capital classifications. From time to time, we may need to raise additional capital to support our Company’s and Bank’s further growth and to maintain their “well capitalized” status.

The Company and Bank elected the CECL 5-year transition guidance for calculating regulatory capital ratios and the March 31, 2022 ratios include this election. This guidance allows an entity to add back to capital 100%For a discussion of the ~~capital impact from the day one CECL transition adjustment and 25% of subsequent increases to the allowance~~provision for credit losses ~~through~~for the three and six months ended December 31, 2022, see “Results of Operations—Provision for Credit Losses.” We believe that the lower average LTV in the Bank’s mortgage loan portfolio will continue to result in future lower average mortgage loan charge-offs when compared to many other comparable banks. We do not expect the resolution of the Bank’s existing other real estate owned and non-performing loans will have a significant adverse impact on our operating results.

Investment Securities

Total investment securities was $248.4 million as of December 31, 2022, compared with $264.3 million at June 30, ~~2023. This cumulative amount will then be phased out~~2022. During the six months ended December 31, 2022, we did not purchase any securities and received principal repayments of ~~regulatory capital over~~approximately $9.1 million in our available-for-sale portfolio. The remainder of the ~~next three years.~~change for the available-for-sale portfolio is attributable to unrealized losses, accretion and other changes.

Deposits

Deposits increased by $1.7 billion, or 12.5%, to $15.7 billion at December 31, 2022, from $13.9 billion at June 30, 2022. Interest-bearing demand and savings increased $3.3 billion and time deposits increased $21.9 million. Non-interest bearing deposits decreased $1.6 billion, or 31.6%, to $3.4 billion at December 31, 2022, from $5.0 billion at June 30, 2022.

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


	December 31, 2022				June 30, 2022
(Dollars in thousands)	Amount		Rate1		Amount		Rate1
Non-interest bearing	$	3,442,148	—	%	$	5,033,970	—	%
Interest bearing:
Demand	5,661,863		3.03	%	3,611,889		0.61	%
Savings	5,509,620		2.93	%	4,245,555		0.95	%
Total interest-bearing demand and savings	11,171,483		2.98	%	7,857,444		0.79	%
Time deposits:
$250 and under2	688,524		1.85	%	651,392		1.22	%
Greater than $250	388,339		3.50	%	403,616		1.41	%
Total time deposits	1,076,863		2.41	%	1,055,008		1.25	%
Total interest bearing2	12,248,346		2.93	%	8,912,452		0.85	%
Total deposits	$	15,690,494	2.29	%	$	13,946,422	0.54	%

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

2The total interest bearing includes brokered deposits of $2,508.8 million and $1,032.7 million as of December 31, 2022 and June 30, 2022, respectively, of which $399.9 million and $250.0 million, respectively, are time deposits classified as $250 and under.

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The ~~Company’s~~following table sets forth the number of deposit accounts by type as of the date indicated:


	December 31, 2022	June 30, 2022	December 31, 2021
Non-interest bearing	43,747	42,372	39,698
Interest-bearing checking and savings accounts	365,714	344,593	342,127
Time deposits	7,475	8,734	10,234
Total number of accounts	416,936	395,699	392,059

Total deposits that exceeded the FDIC insurance limit of $250,000 at December 31, 2022 and ~~Bank’s estimated capital amounts, capital ratios~~June 30, 2022 were $2.0 billion and ~~capital requirements under Basel III~~$2.3 billion, respectively. The maturities of certificates of deposit that exceeded the FDIC insurance limit of $250,000 at December 31, 2022 were as follows:

Axos Financial, Inc. Axos Bank “Well
Capitalized”
Ratio Minimum Capital
Ratio
(Dollars in millions) March 31, 2022 June 30,
2021 March 31, 2022 June 30,
2021
Regulatory Capital:
Tier 1 $ 1,459 $ 1,309 $ 1,505 $ 1,263
Common equity tier 1 $ 1,459 $ 1,309 $ 1,505 $ 1,263
Total capital (to risk-weighted assets) $ 1,898 $ 1,588 $ 1,611 $ 1,358
Assets:
Average adjusted $ 15,477 $ 14,851 $ 14,319 $ 13,360
Total risk-weighted $ 14,267 $ 11,523 $ 13,162 $ 10,283
Regulatory Capital Ratios:
Tier 1 leverage (core) capital to adjusted average assets 9.43 % 8.82 % 10.51 % 9.45 % 5.00 % 4.00 %
Common equity tier 1 capital (to risk-weighted assets) 10.23 % 11.36 % 11.43 % 12.28 % 6.50 % 4.50 %
Tier 1 capital (to risk-weighted assets) 10.23 % 11.36 % 11.43 % 12.28 % 8.00 % 6.00 %
Total capital (to risk-weighted assets) 13.30 % 13.78 % 12.24 % 13.21 % 10.00 % 8.00 %


(Dollars in thousands)	December 31, 2022
3 months or less	$	5,772
3 months to 6 months	1,829
6 months to 12 months	6,222
Over 12 months	11,780
Total	$	25,603

~~Basel III implemented~~

Borrowings

The following table sets forth the composition of our borrowings and the interest rates at the dates indicated:


	December 31, 2022				June 30, 2022				December 31, 2021
(Dollars in thousands)	Balance		Weighted Average Rate		Balance		Weighted Average Rate		Balance		Weighted Average Rate

FHLB Advances	$100,000		2.26	%	$117,500		2.26	%	$157,500		2.29	%
Borrowings, subordinated notes and debentures	334,077		4.59	%	445,244		3.86	%	260,435		4.37	%
Total borrowings	$434,077		4.05	%	$562,744		3.53	%	$417,935		3.59	%

Weighted average cost of borrowings during the quarter	4.36	%			2.85	%			2.64	%
Borrowings as a percent of total assets	2.32	%			3.23	%			2.69	%

At December 31, 2022, total borrowings amounted to $434.1 million, down $128.7 million, or 22.9%, from June 30, 2022 and up $16.1 million or 3.9% from December 31, 2021. Borrowings as a ~~requirement~~percent of total assets were 2.32%, 3.23% and 2.69% at December 31, 2022, June 30, 2022 and December 31, 2021, respectively. Weighted average cost of borrowings during the quarter were 4.36%, 2.85% and 2.64% for ~~all banking organizations~~the quarters ended December 31, 2022, June 30, 2022 and December 31, 2021, respectively.

We regularly use advances from the FHLB to ~~maintain~~manage our interest rate risk and, to a ~~capital conservation buffer above~~lesser extent, manage our liquidity position. Generally, FHLB advances with terms between three and ten years have been used to fund the ~~minimum risk-based capital requirements~~purchase of single family and multifamily mortgages and to provide us with interest rate risk protection should rates rise.

Stockholders’ Equity

Stockholders’ equity increased $144.6 million to $1,787.6 million at December 31, 2022 compared to $1,643.0 million at June 30, 2022. The increase was the result of net income for the six months ended December 31, 2022 of $140.0 million and stock compensation expense and restricted stock unit vesting which combined for an increase of $8.6 million, partially offset by a $4.0 million decrease in ~~order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively composed~~accumulated other comprehensive income, net of ~~common equity tier 1 capital, and it applies to each of~~tax.

During the three ~~risk-based capital ratios but not the leverage ratio. At March 31, 2022, our Company~~ and Bank are in compliance with the capital conservation buffer requirement, which sets the common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratio minimums to 7.0%, 8.5% and 10.5%, respectively.

~~Securities Business~~

Pursuant to the net capital requirements of the Exchange Act, Axos Clearing, is subject to the SEC Uniform Net Capital (Rule 15c3-1 of the Exchange Act). Under this rule, the Company has elected to operate under the alternate method and is required to maintain minimum net capital of $250,000 or 2% of aggregate debit balances arising from client transactions, as defined. Under the alternate method, the Company may not repay subordinated debt, pay cash distributions, or make any unsecured advances or loans to its parent or employees if such payment would result in net capital of less than 5% of aggregate debit balances or less than 120% of its minimum dollar requirement.

~~The net capital positions of Axos Clearing were as follows:~~

(Dollars in thousands) March 31, 2022 June 30, 2021
Net capital $ 39,109 $ 35,950
Excess Capital $ 31,612 $ 27,904
Net capital as a percentage of aggregate debit items 10.43 % 8.94 %
Net capital in excess of 5% aggregate debit items $ 20,369 $ 15,836

Axos Clearing as a clearing broker, is subject to SEC Customer Protection Rule (Rule 15c3-3 of the Exchange Act) which requires segregation of funds in a special reserve account for the benefit of customers. At Marchsix months ended December 31, 2022, the Company ~~had a deposit requirement~~did not repurchase any common stock shares. The Company has $52.8 million remaining under the Board authorized stock repurchase program as of ~~$220.5 million and maintained a deposit of $224.6 million. On April 1, 2022, the company made a deposit of $6.0 million.~~December 31, 2022.

Certain broker-dealers have chosen to maintain brokerage customer accounts at Axos Clearing. To allow these broker-dealers to classify their assets held by the Company as allowable assets in their computation of net capital, the Company computes a separate reserve requirement for Proprietary Accounts of Brokers (PAB). At March 31, 2022, the Company had a deposit requirement of $34.3 million and maintained a deposit of $26.4 million. On January 1, 2022, the Company made a deposit in the amount of $8.9 million.

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~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~

We measure interest rate sensitivity as the difference between amounts of interest-earning assets and interest-bearing liabilities that mature or contractually re-price within a given period of time. The difference, or the interest rate sensitivity gap, provides an indication of the extent to which an institution’s interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities and negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. In a rising interest rate environment, an institution with a positive gap would be in a better position than an institution with a negative gap to invest in higher yielding assets or to have its asset yields adjusted upward, which would cause the yield on its assets to increase at a faster pace than the cost of its interest-bearing liabilities. During a period of falling interest rates, however, an institution with a positive gap would tend to have its assets reprice at a faster rate than one with a negative gap, which would tend to reduce the growth in its net interest income.

Banking Business

For the three months ended December 31, 2022, our Banking Business segment had income before taxes of $109 million compared to income before taxes of $92.1 million for the three months ended December 31, 2021. For the six months ended December 31, 2022, the Banking Business segment had income before taxes of $190 million compared to income before taxes of $182.4 million for the six months ended December 31, 2021. For the three and six months ended December 31, 2022, the increase in income before taxes compared to the three and six months ended December 31, 2021, was mainly due to an increase in net interest income, partially offset by higher non-interest expense and lower non-interest income.

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


	At or for the Three Months Ended				At or for the Six Months Ended
	December 31, 2022		December 31, 2021		December 31, 2022		December 31, 2021
Efficiency ratio	46.05	%	39.39	%	49.33	%	39.66	%
Return on average assets	1.75	%	1.92	%	1.57	%	1.92	%
Interest rate spread	3.81	%	4.14	%	3.84	%	4.23	%
Net interest margin	4.65	%	4.30	%	4.58	%	4.39	%

Our Banking Business 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 Axos Financial, Inc. 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 borrowings that particularly decrease net interest margin.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid


	For the Three Months Ended
	December 31,
	2022						2021
(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:
Loans3, 4	$	15,429,873	$	255,309	6.62	%	$	12,076,831	$	148,960	4.93	%
Interest-earning deposits in other financial institutions	1,362,744		13,126		3.85	%	963,533		376		0.16	%
Mortgage-backed and other investment securities4	264,673		3,615		5.46	%	163,417		1,458		3.57	%
Stock of the regulatory agencies	18,685		411		8.80	%	17,402		260		5.98	%
Total interest-earning assets	17,075,975		272,461		6.38	%	13,221,183		151,054		4.57	%
Non-interest-earning assets	341,701						301,502
Total assets	$	17,417,676					$	13,522,685
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	10,045,861	$	65,093	2.59	%	$	6,619,803	$	4,316	0.26	%
Time deposits	1,146,877		6,321		2.20	%	1,333,848		3,506		1.05	%

Advances from the FHLB	290,918		2,504		3.44	%	272,033		973		1.43	%
Borrowings, subordinated notes and debentures	33		—		—	%	261		—		—	%
Total interest-bearing liabilities	11,483,689		73,918		2.57	%	8,225,945		8,795		0.43	%
Non-interest-bearing demand deposits	4,001,370						3,784,965
Other non-interest-bearing liabilities	198,916						131,229
Stockholders’ equity	1,733,701						1,380,546
Total liabilities and stockholders’ equity	$	17,417,676					$	13,522,685
Net interest income			$	198,543					$	142,259
Interest rate spread5					3.81	%					4.14	%
Net interest margin6					4.65	%					4.30	%

1Average balances are obtained from daily data.

2Annualized.

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

4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees.

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 annualized net interest income as a percentage of average interest-earning assets.

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	For the Six Months Ended
	December 31,
	2022						2021
(Dollars in thousands)	Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2		Average Balance1		Interest Income/ Expense		Average Yields Earned/Rates Paid2
Assets:
Loans3, 4	$	15,082,455	$	463,319	6.14	%	$	11,849,452	$	297,803	5.03	%
Interest-earning deposits in other financial institutions	1,145,975		18,757		3.27	%	921,695		713		0.15	%
Mortgage-backed and other investment securities4	270,324		6,986		5.17	%	171,981		3,004		3.49	%
Stock of the regulatory agencies	23,483		829		7.06	%	17,613		530		6.02	%
Total interest-earning assets	16,522,237		489,891		5.93	%	12,960,741		302,050		4.66	%
Non-interest-earning assets	327,034						294,156
Total assets	$	16,849,271					$	13,254,897
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	8,927,706	$	92,833	2.08	%	$	6,617,301	$	7,910	0.24	%
Time deposits	1,151,797		11,116		1.93	%	1,348,454		7,651		1.13	%

Advances from the FHLB	585,633		7,667		2.62	%	283,717		1,989		1.40	%
Borrowings, subordinated notes and debentures	27		—		—	%	152		—		—	%
Total interest-bearing liabilities	10,665,163		111,616		2.09	%	8,249,624		17,550		0.43	%
Non-interest-bearing demand deposits	4,292,481						3,511,837
Other non-interest-bearing liabilities	192,094						141,222
Stockholders’ equity	1,699,533						1,352,214
Total liabilities and stockholders’ equity	$	16,849,271					$	13,254,897
Net interest income			$	378,275					$	284,500
Interest rate spread5					3.84	%					4.23	%
Net interest margin6					4.58	%					4.39	%

1Average balances are obtained from daily data.

2Annualized.

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

4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees.

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 annualized net interest income as a percentage of average interest-earning assets.

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Average Balances, Net Interest Income, Yields Earned and Rates Paid


	For the Three Months Ended						For the Six Months Ended
	December 31,						December 31,
	2022 vs 2021						2022 vs 2021
	Increase (Decrease) Due to						Increase (Decrease) Due to
(Dollars in thousands)	Volume		Rate		Total Increase (Decrease)			Volume		Rate		Total Increase (Decrease)
Increase / (decrease) in interest income:
Loans	$	47,590	$	58,759	$	106,349		$	91,506	$	74,010	$	165,516

Interest-earning deposits in other financial institutions	225		12,525		12,750			208		17,836		18,044
Mortgage-backed and other investment securities	1,163		994		2,157			2,162		1,820		3,982
Stock of the regulatory agencies, at cost	20		131		151			197		102		299
	$	48,998	$	72,409	$	121,407		$	94,073	$	93,768	$	187,841
Increase / (decrease) in interest expense:
Interest-bearing demand and savings	$	3,318	$	57,459	$	60,777		$	3,698	$	81,225	$	84,923
Time deposits	(551)		3,366		2,815			(1,251)		4,716		3,465

Advances from the FHLB	73		1,458		1,531			3,121		2,557		5,678

	$	2,840	$	62,283	$	65,123		$	5,568	$	88,498	$	94,066

The Banking Business segment’s net interest income for the three and six months ended December 31, 2022 totaled $198.5 million and $378.3 million, an increase of 39.6% and an increase of 33.0%, compared to net interest income of $142.3 million and $284.5 million for the three and six months ended December 31, 2021, respectively. The increase for the three and six months ended December 31, 2022 was primarily due to higher average balances and rates earned in the loan portfolio, higher rates on deposits placed with other financial institutions and a higher average balance of non-interest bearing deposits, partially offset by higher rates paid on deposits.

The Banking Business segment’s non-interest income decreased $5.7 million to $10.6 million and decreased $9.9 million to $21.3 million for the three and six months ended December 31, 2022 compared to the three and six months ended December 31, 2021, respectively. The decreases for the three and six months ended December 31, 2022 compared to the three and six months ended December 31, 2021, were mainly the result of lower mortgage banking income and prepayment penalty fee income as higher mortgage rates contributed to lower originations and a reduction in the fair value of our MSRs, and slower prepayments, respectively.

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Securities Business

The following table provides selected information for Axos Clearing LLC as of each period indicated:


(Dollars in thousands)	December 31, 2022		June 30, 2022

FDIC insured deposit program balances at banks	$	2,353,167	$	3,452,358
Customer margin balances	$	206,776	$	285,894
Cash reserves for the benefit of customers	$	196,910	$	372,112





Securities lending:
Interest-earning assets – securities borrowed	$	58,846	$	338,980
Interest-bearing liabilities – securities loaned	$	156,008	$	474,400

FINANCIAL CONDITION

Balance Sheet Analysis

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Loans

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


	December 31, 2022				June 30, 2022
(Dollars in thousands)	Amount		Percent		Amount		Percent
Single Family - Mortgage & Warehouse	$	3,988,955	25.5	%	$	3,988,462	28.0	%
Multifamily and Commercial Mortgage	3,050,128		19.5	%	2,877,680		20.2	%
Commercial Real Estate	5,762,049		36.9	%	4,781,044		33.5	%
Commercial & Industrial - Non-RE	2,208,945		14.1	%	2,028,128		14.2	%
Auto & Consumer	632,183		4.0	%	567,228		4.0	%
Other	7,234		—	%	11,134		0.1	%
Total gross loans	15,649,494		100.0	%	14,253,676		100.0	%
Allowance for credit losses - loans	(157,218)				(148,617)
Unaccreted discounts and loan fees	(19,064)				(13,998)
Total net loans	$	15,473,212			$	14,091,061

The Bank originates some single family interest only loans with terms that include repayments that are less than the repayments for fully amortizing loans. 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 loan-to-values (“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 Bank monitors and performs reviews of interest only loans as part of its loan portfolio management process. 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 December 31, 2022, the Company had $1.3 billion of interest only mortgage loans with a weighted average LTV of 58.5%.

Asset Quality and Allowance for Credit Losses - Loans

Non-performing Assets

Non-performing loans and foreclosed assets or “non-performing assets” consisted of the following as of the dates indicated:


(Dollars in thousands)	December 31, 2022			June 30, 2022			Inc (Dec)
Non-performing assets:
Non-accrual loans:
Single Family - Mortgage & Warehouse	$	39,043		$	66,424		$	(27,381)
Multifamily and Commercial Mortgage	35,275			33,410			1,865
Commercial Real Estate	14,852			14,852			—
Commercial & Industrial - Non-RE	2,989			2,989			—
Auto & Consumer	1,447			439			1,008
Other	1,382			80			1,302
Total non-performing loans	94,988			118,194			(23,206)
Foreclosed real estate	4,383			—			4,383
Repossessed—Autos	1,421			798			623
Total non-performing assets	$	100,792		$	118,992		$	(18,200)
Total non-performing loans as a percentage of total loans	0.61		%	0.83		%	(0.22)		%
Total non-performing assets as a percentage of total assets	0.54		%	0.68		%	(0.14)		%

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The Bank had no performing troubled debt restructurings as of December 31, 2022 and June 30, 2022. A troubled debt restructuring is a concession made to a borrower experiencing financial difficulties, typically permanent or temporary modifications of principal and interest payments or an extension of maturity dates. When a loan is delinquent and classified as a troubled debt restructuring, no interest is accrued until the borrower demonstrates over time (typically six months) that it can make payments. When a loan is considered a troubled debt restructuring and is on nonaccrual, it is considered non-performing and included in the table above.

Management establishes an allowance for credit losses based upon its evaluation of the expected life-time credit losses related to the amortized cost basis of loans on the balance sheet. For additional information regarding the Company’s allowance for credit losses see Note 5 - Loans and Allowance for Credit Losses in the condensed consolidated financial statements. For a discussion of the provision for credit losses for the three and six months ended December 31, 2022, see “Results of Operations—Provision for Credit Losses.” We believe that the lower average LTV in the Bank’s mortgage loan portfolio will continue to result in future lower average mortgage loan charge-offs when compared to many other comparable banks. We do not expect the resolution of the Bank’s existing other real estate owned and non-performing loans will have a significant adverse impact on our operating results.

Investment Securities

Total investment securities was $248.4 million as of December 31, 2022, compared with $264.3 million at June 30, 2022. During the six months ended December 31, 2022, we did not purchase any securities and received principal repayments of approximately $9.1 million in our available-for-sale portfolio. The remainder of the change for the available-for-sale portfolio is attributable to unrealized losses, accretion and other changes.

Deposits

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


	December 31, 2022				June 30, 2022
(Dollars in thousands)	Amount		Rate1		Amount		Rate1
Non-interest bearing	$	3,442,148	—	%	$	5,033,970	—	%
Interest bearing:
Demand	5,661,863		3.03	%	3,611,889		0.61	%
Savings	5,509,620		2.93	%	4,245,555		0.95	%
Total interest-bearing demand and savings	11,171,483		2.98	%	7,857,444		0.79	%
Time deposits:
$250 and under2	688,524		1.85	%	651,392		1.22	%
Greater than $250	388,339		3.50	%	403,616		1.41	%
Total time deposits	1,076,863		2.41	%	1,055,008		1.25	%
Total interest bearing2	12,248,346		2.93	%	8,912,452		0.85	%
Total deposits	$	15,690,494	2.29	%	$	13,946,422	0.54	%

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

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


	December 31, 2022	June 30, 2022	December 31, 2021
Non-interest bearing	43,747	42,372	39,698
Interest-bearing checking and savings accounts	365,714	344,593	342,127
Time deposits	7,475	8,734	10,234
Total number of accounts	416,936	395,699	392,059


(Dollars in thousands)	December 31, 2022
3 months or less	$	5,772
3 months to 6 months	1,829
6 months to 12 months	6,222
Over 12 months	11,780
Total	$	25,603

Borrowings

The following table sets forth the composition of our borrowings and the interest rates at the dates indicated:


	December 31, 2022				June 30, 2022				December 31, 2021
(Dollars in thousands)	Balance		Weighted Average Rate		Balance		Weighted Average Rate		Balance		Weighted Average Rate

FHLB Advances	$100,000		2.26	%	$117,500		2.26	%	$157,500		2.29	%
Borrowings, subordinated notes and debentures	334,077		4.59	%	445,244		3.86	%	260,435		4.37	%
Total borrowings	$434,077		4.05	%	$562,744		3.53	%	$417,935		3.59	%

Weighted average cost of borrowings during the quarter	4.36	%			2.85	%			2.64	%
Borrowings as a percent of total assets	2.32	%			3.23	%			2.69	%

At December 31, 2022, total borrowings amounted to $434.1 million, down $128.7 million, or 22.9%, from June 30, 2022 and up $16.1 million or 3.9% from December 31, 2021. Borrowings as a percent of total assets were 2.32%, 3.23% and 2.69% at December 31, 2022, June 30, 2022 and December 31, 2021, respectively. Weighted average cost of borrowings during the quarter were 4.36%, 2.85% and 2.64% for the quarters ended December 31, 2022, June 30, 2022 and December 31, 2021, respectively.

Stockholders’ Equity

During the three and six months ended December 31, 2022, the Company did not repurchase any common stock shares. The Company has $52.8 million remaining under the Board authorized stock repurchase program as of December 31, 2022.

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LIQUIDITY

Cash flow information is as follows:


	For the Six Months Ended
	December 31,
(Dollars in thousands)	2022		2021
Operating Activities	$	177,076	$	(72,501)
Investing Activities	$	(1,411,404)	$	(1,136,966)
Financing Activities	$	1,612,142	$	1,290,048

During the six months ended December 31, 2022, we had net cash inflows from operating activities of $177.1 million compared to outflows of $72.5 million for the six months ended December 31, 2021. Net operating cash inflows and outflows fluctuate primarily due to the timing of the following: originations of loans held for sale, proceeds from loan sales, securities borrowed and loaned, and customer, broker-dealer and clearing receivables and payables and changes in other assets and payables.

Net cash outflows from investing activities totaled $1,411.4 million for the six months ended December 31, 2022, while outflows totaled $1,132.7 million for the six months ended December 31, 2021. The increase in outflows was primarily due to lower principal repayments on loans held for investment, partially offset by lower loan originations.

Net cash inflows from financing activities totaled $1,612.1 million for the six months ended December 31, 2022, compared to net cash inflows from financing activities of $1,290.0 million for the six months ended December 31, 2021. The primary driver behind the increase in net cash inflows was a larger net increase in deposits for the six months ended December 31, 2022.

During the six months ended December 31, 2022, the Bank could borrow up to 40.0% of its total assets from the FHLB. Borrowings are collateralized by the pledge of certain mortgage loans and investment securities to the FHLB. At December 31, 2022, the Company had $2,250.4 million available immediately and $4,677.9 million available with additional collateral. At December 31, 2022, we also had three unsecured federal funds purchase lines with three different banks totaling $200 million, under which no borrowings were outstanding.

The Bank has the ability to borrow short-term from the Federal Reserve Bank of San Francisco Discount Window. At December 31, 2022, the Bank did not have any borrowings outstanding and the amount available from this source was $2,880.6 million. The credit line is collateralized by consumer loans and mortgage-backed securities.

Axos Clearing has a total of $150 million in uncommitted secured lines of credit for borrowing as needed. As of December 31, 2022, there was no amount outstanding. These credit facilities bear interest at rates based on the Federal Funds rate and are due upon demand.

Axos Clearing has a $190 million committed unsecured line of credit available for limited purpose borrowing, which includes $100 million from Axos Financial, Inc. As of December 31, 2022, there was no amount outstanding on this credit facility after elimination of intercompany balances. This credit facility bears interest at rates based on the Federal Funds rate and is due upon demand.

OFF-BALANCE SHEET COMMITMENTS

At December 31, 2022, we had commitments to originate loans with an aggregate outstanding principal balance of $3,049.6 million, and commitments to sell loans with an aggregate outstanding principal balance of $4.6 million. We have no commitments to purchase loans, investment securities or any other unused lines of credit.

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CAPITAL RESOURCES AND REQUIREMENTS

Our Company and Bank are subject to regulatory capital adequacy requirements promulgated by federal bank regulatory agencies. Failure by our Company or Bank to meet minimum capital requirements could result in certain mandatory and discretionary actions by regulators that could have a material adverse effect on our results of operations or financial condition. The Federal Reserve establishes capital requirements for our Company and the OCC has similar requirements for our Bank. Under these capital requirements and the regulatory framework for prompt corrective action, our Company and Bank must meet specific capital guidelines that involve quantitative measures of our Company and Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Our Company’s and Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors.

Quantitative measures established by regulation require our Company and Bank to maintain certain minimum capital amounts and ratios. Federal bank regulators require our Company and Bank to maintain minimum ratios of tier 1 capital to adjusted average assets of 4.0%, common equity tier 1 capital to risk-weighted assets of 4.5%, tier 1 capital to risk-weighted assets of 6.0% and total risk-based capital to risk-weighted assets of 8.0%. To be “well capitalized,” our Company and Bank must maintain minimum leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios of at least 5.0%, 6.5%, 8.0% and 10.0%, respectively. At December 31, 2022, our Company and Bank met all the capital adequacy requirements to which they were subject and were “well capitalized” under the regulatory framework for prompt corrective action. Management believes that no conditions or events have occurred since December 31, 2022 that would materially adversely change the Company’s and Bank’s capital classifications. From time to time, we may need to raise additional capital to support our Company’s and Bank’s further growth and to maintain their “well capitalized” status.

The Company and Bank both elected the five-year current expected credit losses (“CECL”) transition guidance for calculating regulatory capital and ratios and the December 31, 2022 and June 30, 2022 amounts reflect this election. This guidance allowed an entity to add back to regulatory capital 100% of the impact of the day one CECL transition adjustment and 25% of subsequent increases to the allowance for credit losses through June 30, 2022. Beginning with fiscal year 2023, this cumulative amount is phased out of regulatory capital at 25% per year until it is 100% phased out of regulatory capital beginning in fiscal year 2026.

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The Company’s and Bank’s estimated capital amounts, capital ratios and capital requirements under Basel III were as follows:


	Axos Financial, Inc.						Axos Bank						“Well Capitalized” Ratio	Minimum Capital Ratio
(Dollars in millions)	December 31, 2022			June 30, 2022			December 31, 2022			June 30, 2022
Regulatory Capital:
Tier 1	$	1,662		$	1,522		$	1,747		$	1,615
Common equity tier 1	$	1,662		$	1,522		$	1,747		$	1,615
Total capital	$	2,125		$	1,966		$	1,878		$	1,726

Assets:
Average adjusted	$	18,348		$	16,461		$	17,391		$	15,165
Total risk-weighted	$	15,751		$	15,443		$	15,487		$	14,366

Regulatory Capital Ratios:
Tier 1 leverage (to adjusted average assets)	9.06		%	9.25		%	10.05		%	10.65		%	5.00%	4.00%
Common equity tier 1 capital (to risk-weighted assets)	10.55		%	9.86		%	11.28		%	11.24		%	6.50%	4.50%
Tier 1 capital (to risk-weighted assets)	10.55		%	9.86		%	11.28		%	11.24		%	8.00%	6.00%
Total capital (to risk-weighted assets)	13.49		%	12.73		%	12.13		%	12.01		%	10.00%	8.00%

Basel III implemented a requirement for all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively composed of common equity tier 1 capital, and it applies to each of the three risk-based capital ratios but not the leverage ratio. At December 31, 2022 and June 30, 2022, our Company and Bank were in compliance with the capital conservation buffer requirement, which sets the common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratio minimums to 7.0%, 8.5% and 10.5%, respectively.

Securities Business

The net capital positions of Axos Clearing were as follows:


(Dollars in thousands)	December 31, 2022			June 30, 2022
Net capital	$	60,334		$	38,915
Excess Capital	$	55,977		$	32,665

Net capital as a percentage of aggregate debit items	27.69		%	12.45		%
Net capital in excess of 5% aggregate debit items	$	49,441		$	23,290

Axos Clearing, as a clearing broker, is subject to SEC Customer Protection Rule (Rule 15c3-3 of the Exchange Act) which requires segregation of funds in a special reserve account for the benefit of customers. At December 31, 2022, the Company calculated a deposit requirement of $189.6 million and maintained a deposit of $182.3 million. On January 3, 2023, the Company made a deposit of $16.8 million.

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computes a separate reserve requirement for Proprietary Accounts of Brokers (PAB). At December 31, 2022, the Company calculated a deposit requirement of $20.1 million and maintained a deposit of $14.3 million. On January 3, 2023, the Company made a withdrawal in the amount of $6.8 million.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For further discussion of the Company’s market risk, see “Quantitative and Qualitative Disclosures About Market Risk” in the 2022 Form 10-K.

Banking Business

The following table sets forth the amounts of interest earning assets and interest bearing liabilities that were outstanding at ~~March~~December 31, 2022 and the portions of each financial instrument that are expected to mature or reset interest rates in each future period:


		Term to Repricing, Repayment, or Maturity at																Term to Repricing, Repayment, or Maturity at
		March 31, 2022																December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Six Months or Less			Over Six Months Through One Year			Over One Year Through Five Years			Over Five Years			Total			(Dollars in thousands)	Six Months or Less			Over Six Months Through One Year			Over One Year Through Five Years			Over Five Years			Total
Interest-earning assets:	Interest-earning assets:																Interest-earning assets:
Cash and cash equivalents	Cash and cash equivalents	$	973,060		$	—		$	—		$	—		$	973,060		Cash and cash equivalents	$	1,660,666		$	—		$	—		$	—		$	1,660,666
Securities1		219,108			1,465			12,566			19,096			252,235
Securities																	Securities	225,978			2,541			11,665			15,468			255,652
Stock of the FHLB, at cost	Stock of the FHLB, at cost	17,250			—			—			—			17,250			Stock of the FHLB, at cost	17,250			—			—			—			17,250
Loans—net of allowance for credit loss	Loans—net of allowance for credit loss	8,522,787			1,489,650			3,119,827			67,795			13,200,059			Loans—net of allowance for credit loss	10,178,099			1,263,731			3,987,822			178,500			15,608,152
Loans held for sale	Loans held for sale	30,793			—			—			—			30,793			Loans held for sale	4,747			—			—			—			4,747
Total interest-earning assets	Total interest-earning assets	9,762,998			1,491,115			3,132,393			86,891			14,473,397			Total interest-earning assets	12,086,740			1,266,272			3,999,487			193,968			17,546,467
Non-interest earning assets	Non-interest earning assets	—			—			—			—			295,239			Non-interest earning assets	—			—			—			—			346,616
Total assets	Total assets	$	9,762,998		$	1,491,115		$	3,132,393		$	86,891		$	14,768,636		Total assets	$	12,086,740		$	1,266,272		$	3,999,487		$	193,968		$	17,893,083
Interest-bearing liabilities:	Interest-bearing liabilities:																Interest-bearing liabilities:
Interest-bearing deposits	Interest-bearing deposits	$	6,787,066		$	1,635,122		$	328,359		$	—		$	8,750,547		Interest-bearing deposits	$	9,438,274		$	2,621,885		$	289,246		$	972		$	12,350,377

Advances from the FHLB	Advances from the FHLB	40,000			22,500			30,000			60,000			152,500			Advances from the FHLB	10,000			—			30,000			60,000			100,000

Total interest-bearing liabilities	Total interest-bearing liabilities	6,827,066			1,657,622			358,359			60,000			8,903,047			Total interest-bearing liabilities	9,448,274			2,621,885			319,246			60,972			12,450,377
Other non-interest-bearing liabilities	Other non-interest-bearing liabilities	—			—			—			—			4,336,869			Other non-interest-bearing liabilities	—			—			—			—			3,674,965
Stockholders’ equity	Stockholders’ equity	—			—			—			—			1,528,720			Stockholders’ equity	—			—			—			—			1,767,741
Total liabilities and equity	Total liabilities and equity	$	6,827,066		$	1,657,622		$	358,359		$	60,000		$	14,768,636		Total liabilities and equity	$	9,448,274		$	2,621,885		$	319,246		$	60,972		$	17,893,083
Net interest rate sensitivity gap	Net interest rate sensitivity gap	$	2,935,932		$	(166,507)		$	2,774,034		$	26,891		$	5,570,350		Net interest rate sensitivity gap	$	2,638,466		$	(1,355,613)		$	3,680,241		$	132,996		$	5,096,090
Cumulative gap	Cumulative gap	$	2,935,932		$	2,769,425		$	5,543,459		$	5,570,350		$	5,570,350		Cumulative gap	$	2,638,466		$	1,282,853		$	4,963,094		$	5,096,090		$	5,096,090
Net interest rate sensitivity gap—as a % of total interest earning assets	Net interest rate sensitivity gap—as a % of total interest earning assets	20.29		%	(1.15)		%	19.17		%	0.19		%	38.49		%	Net interest rate sensitivity gap—as a % of total interest earning assets	15.04		%	(7.73)		%	20.97		%	0.76		%	29.04		%
Cumulative gap—as % of total interest earning assets	Cumulative gap—as % of total interest earning assets	20.29		%	19.13		%	38.30		%	38.49		%	38.49		%	Cumulative gap—as % of total interest earning assets	15.04		%	7.31		%	28.29		%	29.04		%	29.04		%

1 ~~Comprised of agency and non-agency mortgage-backed securities, municipal securities and other non-agency debt securities, which are classified as available-for-sale.~~

The above table provides an approximation of the projected re-pricing of assets and liabilities at ~~March~~December 31, 2022 on the basis of contractual maturities, adjusted for anticipated prepayments of principal and scheduled rate adjustments. The loan and securities prepayment rates reflected herein are based on historical experience. For the non-maturity deposit liabilities, we

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use decay rates and rate adjustments based upon our historical experience. Actual repayments of these instruments could vary substantially if future experience differs from our historic experience.

Although “gap” analysis is a useful measurement device available to management in determining the existence of interest rate exposure, its static focus as of a particular date makes it necessary to utilize other techniques in measuring exposure to changes in interest rates. For example, gap analysis is limited in its ability to predict trends in future earnings and makes no

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assumptions about changes in prepayment tendencies, deposit or loan maturity preferences or repricing time lags that may occur in response to a change in the interest rate environment.

The following table indicates the sensitivity of net interest income movements to parallel instantaneous shocks in interest rates for the future 1-12 months and 13-24 months’ time periods. For purposes of modeling net interest income sensitivity, ~~the Bank assumes~~we assume no growth in the balance sheet other than for retained earnings:


		As of March 31, 2022									As of December 31, 2022
		First 12 Months				Next 12 Months					First 12 Months				Next 12 Months
(Dollars in thousands)	(Dollars in thousands)	Net Interest Income		Percentage Change from Base		Net Interest Income		Percentage Change from Base		(Dollars in thousands)	Net Interest Income		Percentage Change from Base		Net Interest Income		Percentage Change from Base

Up 200 basis points	Up 200 basis points	$	659,730	8.7	%	$	680,228	8.3	%	Up 200 basis points	$	763,885	8.8	%	$	893,723	6.5	%

Base	Base	$	606,913	—	%	$	628,221	—	%	Base	$	701,953	—	%	$	839,332	—	%
Down 100 basis points		$	591,220	(2.6)	%	$	598,604	(4.7)	%
Down 200 basis points										Down 200 basis points	$	637,273	(9.2)	%	$	773,026	(7.9)	%

We attempt to measure the effect market interest rate changes will have on the net present value of assets and liabilities, which is defined as market value of equity. We analyze the market value of equity sensitivity to an immediate parallel and sustained shift in interest rates derived from the ~~current treasury and LIBOR yield curves. For rising~~underlying interest rate scenarios, the base market interest rate forecast was increased by 100, 200 and 300 basis points. For falling interest rate scenarios, we used a 100 and 200 basis point decrease due to limitations inherent in the current rate environment.curves.

The following table indicates the sensitivity of market value of equity to the interest rate movement described above:


		As of March 31, 2022							As of December 31, 2022
(Dollars in thousands)	(Dollars in thousands)	Net Present Value		Percentage Change from Base		Net Present Value as a Percentage of Assets		(Dollars in thousands)	Net Present Value		Percentage Change from Base		Net Present Value as a Percentage of Assets
Up 300 basis points		$	1,707,001	(6.6)	%	11.9	%

Up 200 basis points	Up 200 basis points	$	1,784,651	(2.4)	%	12.3	%	Up 200 basis points	$	1,710,148	(5.8)	%	9.9	%
Up 100 basis points	Up 100 basis points	$	1,831,768	0.2	%	12.5	%	Up 100 basis points	$	1,780,406	(2.0)	%	10.2	%
Base	Base	$	1,828,358	—	%	12.3	%	Base	$	1,816,327	—	%	10.3	%
Down 100 basis points	Down 100 basis points	$	1,676,314	(8.3)	%	11.2	%	Down 100 basis points	$	1,800,479	(0.9)	%	10.1	%
Down 200 basis points								Down 200 basis points	$	1,712,806	(5.7)	%	9.5	%

The computation of the prospective effects of hypothetical interest rate changes is based on numerous assumptions, including relative levels of interest rates, asset prepayments, runoffs in deposits and changes in repricing levels of deposits to general market rates, and should not be relied upon as indicative of actual results. Furthermore, these computations do not take into account any actions that we may undertake in response to future changes in interest rates. Those actions include, but are not limited to, making change in loan and deposit interest rates and changes in our asset and liability mix.

Securities Business

Our Securities Business is exposed to market risk primarily due to its role as a financial intermediary in customer transactions, which may include purchases and sales of securities, securities lending activities, and in our trading activities, which are used to support sales, underwriting and other customer activities. We are subject to the risk of loss that may result from the potential change in value of a financial instrument as a result of fluctuations in interest rates, market prices, investor expectations and changes in credit ratings of the issuer.

Our Securities Business is exposed to interest rate risk as a result of maintaining inventories of interest rate sensitive financial instruments and other interest earning assets, including customer and correspondent margin loans and securities borrowing activities. Our exposure to interest rate risk is also from our funding sources including customer and correspondent cash balances, bank borrowings and securities lending activities. Interest rates on customer and correspondent balances and securities produce a positive spread with rates generally fluctuating in parallel.

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With respect to securities held, our interest rate risk is managed by setting and monitoring limits on the size and duration of positions and on the length of time securities can be held. ~~Much~~Many of the interest rates on customer and correspondent margin loans are indexed and can vary daily. Our funding sources are generally short term with interest rates that can vary daily.

Our Securities Business is engaged in various brokerage and trading activities that expose us to credit risk arising from potential non-performance from counterparties, customers or issuers of securities. This risk is managed by setting and

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monitoring position limits for each counterparty, conducting periodic credit reviews of counterparties, reviewing concentrations of securities and conducting business through central clearing organizations.

Collateral underlying margin loans to customers and correspondents and with respect to securities lending activities is marked to market daily and additional collateral is required as necessary.

~~ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS~~

~~See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk.”~~

ITEM 4.CONTROLS AND PROCEDURES

The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer along with our Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In addition, there were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2022 (as defined in Exchange Act Rule 13a-15(f)) that have materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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PART II—OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

The information set forth in Note 98 – “Commitments And Contingencies” to the Unaudited Condensed Consolidated Financial Statements is incorporated herein by reference.

In addition, from time to time we may be 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 Company’s business ~~of the Bank.~~operations. None of such matters are expected to have a material adverse effect on the Company’s financial condition, results of operations or business.

ITEM 1A.RISK FACTORS

We face a variety of risks that are inherent in our business and our industry. These risks are described in more detail under Part 1, “Item 1A. Risk Factors” in our ~~Annual Report on~~2022 Form 10-K, ~~for~~as supplemented by the ~~year ended June 30, 2021.~~risks described below. We encourage you to read these factors in their entirety. Moreover, other factors may also exist that we cannot anticipate or that we currently do not consider to be significant based on information that is currently available.

Liquidity and access to adequate funding cannot be assured.

Liquidity is essential to our business and the inability to raise funds through deposits, borrowings, equity and debt offerings, or other sources could have a materially adverse effect on our liquidity. The Bank may become unable to meet the cash flow requirements of 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 decline in our credit rating (for which a rating agency recently announced a review for downgrade), 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 access to funding with acceptable terms adequate to finance our activities. General factors related to the 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 advances and the Federal Reserve Bank of San Francisco 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”.

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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The table below sets forth our market repurchases of Axos common stock and the Axos common shares retained in connection with net settlement of restricted stock awards during the quarter ended ~~March~~December 31, 2022.


(Dollars in thousands, except per share data)	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
Quarter Ended ~~March~~December 31, 2022
~~January~~October 1, 2022 to ~~January~~October 31, 2022	—	$	—	—	$	—
~~February~~November 1, 2022 to ~~February 28,~~November 30, 2022	—	$	—	—	$	—
~~March~~December 1, 2022 to ~~March~~December 31, 2022	—	$	—	—	$	—
For the Three Months Ended ~~March~~December 31, 2022	—	$	—	—	$	52,764

Stock Retained in Net Settlement2
~~January~~October 1, 2022 to ~~January~~October 31, 2022	~~3,336~~665
~~February~~November 1, 2022 to ~~February 28,~~November 30, 2022	~~1,870~~364
~~March~~December 1, 2022 to ~~March~~December 31, 2022	~~71,147~~14
For the Three Months Ended ~~March~~December 31, 2022	~~76,353~~1,043

1 On ~~March 17, 2016,~~August 2, 2019, the Board of Directors of the Company authorized a program to repurchase up to $100 million of common ~~stock and extended the program by an additional $100 million on August 2, 2019.~~stock. The share repurchase program will continue in effect until terminated by the Board of Directors of the Company. Purchases were made in open-market transactions.

2 ~~Consists~~On October 21, 2021, the stockholders of ~~shares withheld from settlement of equity awards under~~ the ~~amended~~Company approved the Amended and ~~restated~~Restated 2014 Stock Incentive Plan, which, among other changes permitted net settlement of stock issuances related to equity awards for purposes of payment of a grantee’s minimum income tax ~~obligations~~obligation. Stock Retained in Net Settlement was purchased at the vesting price of the associated ~~with settlement~~restricted stock unit.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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~~ITEM 5. OTHER INFORMATION~~

~~None.~~

ITEM 6.EXHIBITS


Exhibit Number	Description	Incorporated By Reference to

~~4.1~~3.1.1	~~Indenture, dated as~~Certificate of ~~February 24, 2022, between Axos Financial, Inc. and U.S. Bank Trust~~Incorporation of the Company, ~~National Association, as trustee~~filed with the Delaware Secretary of State on July 6, 1999	Exhibit ~~4.1~~3.1 to the Registration Statement on Form S-1/A (File No. 333-121329) filed on January 26, 2005.

3.1.2	Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware	Exhibit 3.5 to the Registration Statement on Form S-1/A (File No. 333-121329) filed on January 26, 2005.

3.1.3	Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on February 25, 2003	Exhibit 3.6 to the Registration Statement on Form S-1/A (File No. 333-121329) filed on January 26, 2005.

3.1.4	Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on January 25, 2005	Exhibit 3.2 to the Registration Statement on Form S-1/A (File No. 333-121329) filed on January 26, 2005.

3.1.5	Certificate Eliminating Reference to a Series of Shares from the Certificate of Incorporation of the Company	Exhibit 3.3 to the Current Report on Form 8-K filed on ~~February 24, 2022~~September 7, 2011.

~~4.2~~3.1.6	~~First Supplemental Indenture, dated as~~Certificate of ~~February 24, 2022, between Axos Financial, Inc. and U.S. Bank Trust~~Amendment of Certificate of Incorporation of the Company, ~~National Association, as trustee~~filed with the Delaware Secretary of State on October 25, 2013	Exhibit ~~4.2~~3.1 to the Current Report on Form 8-K filed on ~~February 24, 2022~~October 28, 2013.

~~4.3~~3.1.7	~~Form~~Certificate of ~~Global Note to represent~~Amendment of Certificate of Incorporation of the ~~4.00% Fixed-to-Floating Rate Subordinated Notes due 2032~~Company, filed with the Delaware Secretary of ~~Axos Financial, Inc. (included in Exhibit 4.2 as Exhibit A)~~State on November 5, 2015	Exhibit ~~4.3~~3.1 to the Current Report on Form 8-K filed on ~~February 24,~~November 6, 2015.

3.1.8	Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on September 11, 2018	Exhibit 3.1 to the Current Report on Form 8-K filed on September 11, 2018.

3.1.9	Certificate of Elimination relating to the Series A - 6% Cumulative Nonparticipating Perpetual Preferred	Exhibit 3.1.8 to the Quarterly Report on Form 10-Q filed on January 28, 2021 .

3.1.10	Certificate of Amendment of Certificate of Incorporation of the Company, filed with the Delaware Secretary of State on November 14, 2022	Filed herewith.

31.1	Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.

31.2	Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.

32.1	Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.

32.2	Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith.

101.INS	Inline XBRL Instance Document	The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document	Filed herewith.

101.CAL	Inline XBRL Taxonomy Calculation Linkbase Document	Filed herewith.

101.LAB	Inline XBRL Taxonomy Label Linkbase Document	Filed herewith.

101.PRE	Inline XBRL Taxonomy Presentation Linkbase Document	Filed herewith.

101.DEF	Inline XBRL Taxonomy Definition Document	Filed herewith.

104	Cover Page Interactive Data File	Formatted as Inline XBRL and contained in Exhibit 101

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SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Axos Financial, Inc.

Dated:

~~April 28, 2022~~January 26, 2023

By:

/s/ Gregory Garrabrants

Gregory Garrabrants
President and Chief Executive Officer
(Principal Executive Officer)

Dated:

~~April 28, 2022~~January 26, 2023

By:

/s/ Derrick K. Walsh

Derrick K. Walsh
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

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($ 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
	$	27,060


	As of March 31, 2022
(Dollars in thousands)	With Allowance		With No Allowance		Total
Single Family - Mortgage & Warehouse	$	52,017	$	61,300	$	113,317
Multifamily and Commercial Mortgage	2,941		6,727		9,668
Commercial Real Estate	—		14,952		14,952
Commercial & Industrial - Non-RE	—		—		—
Auto & Consumer	62		383		445
Other	—		372		372
Total nonaccrual loans	$	55,020	$	83,734	$	138,754
Nonaccrual loans to total loans					1.05		%


	Three Months Ended March 31, 2022
(Dollars in thousands)	Allowance for Credit Losses - Loans		Unfunded Loan Commitment Liabilities		Total Allowance for Credit Losses
Balance at January 1, 2022	$	140,489	$	8,723	$	149,212

Provision for Credit Losses	4,500		1,000		5,500

Charge-offs	(1,892)		—		(1,892)
Recoveries	275		—		275
Balance at March 31, 2022	$	143,372	$	9,723	$	153,095


	Three Months Ended March 31, 2021
(Dollars in thousands)	Allowance for Credit Losses - Loans		Unfunded Loan Commitment Liabilities		Total Allowance for Credit Losses
Balance at January 1, 2021	$	136,393	$	5,723	$	142,116
Provision for Credit Losses	2,700		—		2,700

Charge-offs	(1,405)		—		(1,405)
Recoveries	419		—		419
Balance at March 31, 2021	$	138,107	$	5,723	$	143,830


(Dollars in thousands)
Remainder of 2022	$	2,498
2023	10,595
2024	10,287
2025	10,119
2026	9,791
Thereafter	38,821
Total lease payments	82,111
Less: amount representing interest	(8,668)
Total Lease Liability	$	73,443



	As of June 30, 2021
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Goodwill	$	35,721	$	35,501	$	—	$	71,222
Total Assets	$	12,745,029	$	1,450,512	$	70,024	$	14,265,565