AX 10-Q Quarterly Report March 31, 2024

AXOS FINANCIAL, INC.

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ax-20240331

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 31, 2024


☐			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: 56,967,483 shares of common stock, $0.01 par value per share, as of April 19, 2024.

Table of Contents

AXOS FINANCIAL, INC.

INDEX


			Page
PART I – FINANCIAL INFORMATION			1

ITEM 1. FINANCIAL STATEMENTS			1
Condensed Consolidated Balance Sheets (unaudited)			1
Condensed Consolidated Statements of Income (unaudited)			2
Condensed Consolidated Statements of Comprehensive Income (unaudited)			3
Condensed Consolidated Statements of Stockholders’ Equity (unaudited)			4
Condensed Consolidated Statements of Cash Flows (unaudited)			6
Notes to Condensed Consolidated Financial Statements (unaudited)			8
1. Summary of Significant Accounting Policies			8
2. Acquisitions			10
3. Fair Value			11
4. Available-for-Sale Securities			16
5. Loans & Allowance for Credit Losses			18
6. Derivatives			23
7. Stockholders' Equity and Stock-Based Compensation			25
8. Earnings per Common Share			26
9. Commitments and Contingencies			26
10. Segment Reporting and Revenue Information			28
1 1. B o rrowings, Subordinated Notes and Debentures			29

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			30
SELECTED FINANCIAL INFORMATION			33
RESULTS OF OPERATIONS			35
SEGMENT RESULTS			40
FINANCIAL CONDITION			45
LIQUIDITY			48
OFF-BALANCE SHEET COMMITMENTS			49
CAPITAL RESOURCES AND REQUIREMENTS			49


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			50

ITEM 4. CONTROLS AND PROCEDURES			53

PART II – OTHER INFORMATION			54

ITEM 1. LEGAL PROCEEDINGS			54

ITEM 1A. RISK FACTORS			54

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES, USE OF PROCEEDS, AND ISSUER PURCHASES OF EQUITY SECURITIES			54

ITEM 3. DEFAULTS UPON SENIOR SECURITIES			54

ITEM 4. MINE SAFETY DISCLOSURES			54

ITEM 5. OTHER INFORMATION			54

ITEM 6. EXHIBITS			55

SIGNATURES			56

Table of Contents

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

AXOS FINANCIAL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(Dollars in thousands, except par value)	March 31, 2024		June 30, 2023
ASSETS
Cash and cash equivalents	$	2,129,772	$	2,233,027
Restricted cash	216,139		149,059
Total cash, cash equivalents and restricted cash	2,345,911		2,382,086
Trading securities	592		758
Available-for-sale securities	207,582		232,350
Stock of regulatory agencies	22,264		21,510
Loans held for sale, carried at fair value	16,239		23,203
Loans held for sale, lower of cost or fair value	—		776
Loans—net of allowance for credit losses of $ 257,522 as of March 31, 2024 and $ 166,680 as of June 30, 2023	18,733,455		16,456,728
Servicing rights, carried at fair value	28,130		25,443
Securities borrowed	105,853		134,339
Customer, broker-dealer and clearing receivables	292,630		374,074
Goodwill and other intangible assets—net	144,324		152,149
Other assets	745,153		545,053
TOTAL ASSETS	$	22,642,133	$	20,348,469

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	2,758,596	$	2,898,150
Interest bearing	16,344,936		14,224,958
Total deposits	19,103,532		17,123,108
Advances from the Federal Home Loan Bank	90,000		90,000
Borrowings, subordinated notes and debentures	330,389		361,779
Securities loaned	119,800		159,832
Customer, broker-dealer and clearing payables	387,176		445,477
Accounts payable and other liabilities	414,943		251,114
Total liabilities	20,445,840		18,431,310
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS’ EQUITY:
Common stock—$ 0.01 par value; 150,000,000 shares authorized; 70,033,523 shares issued and 57,079,429 shares outstanding as of March 31, 2024; 69,465,446 shares issued and 58,943,035 shares outstanding as of June 30, 2023	700		695
Additional paid-in capital	502,489		479,878
Accumulated other comprehensive income (loss)—net of income tax	( 3,064 )		( 6,610 )
Retained earnings	2,080,745		1,735,609
Treasury stock, at cost; 12,954,094 shares as of March 31, 2024 and 10,522,411 shares as of June 30, 2023	( 384,577 )		( 292,413 )
Total stockholders’ equity	2,196,293		1,917,159
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	22,642,133	$	20,348,469

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
(Dollars in thousands, except earnings per common share)	2024		2023		2024		2023
INTEREST AND DIVIDEND INCOME:
Loans, including fees	$	405,280	$	279,864	$	1,090,106	$	743,863
Securities borrowed and customer receivables	5,701		5,137		16,163		13,842
Investments and other	32,583		22,333		95,910		53,003
Total interest and dividend income	443,564		307,334		1,202,179		810,708
INTEREST EXPENSE:
Deposits	176,737		98,439		483,028		202,292
Advances from the Federal Home Loan Bank	735		4,454		1,794		12,121
Securities loaned	376		1,307		1,835		3,317
Other borrowings	4,110		4,152		14,155		13,611
Total interest expense	181,958		108,352		500,812		231,341
Net interest income	261,606		198,982		701,367		579,367
Provision for credit losses	6,000		5,500		26,500		17,251
Net interest income, after provision for credit losses	255,606		193,482		674,867		562,116
NON-INTEREST INCOME:
Broker-dealer fee income	12,087		13,745		37,083		32,735
Advisory fee income	8,105		6,879		23,686		20,821
Banking and service fees	8,876		8,443		27,287		25,100
Mortgage banking and servicing rights income	2,180		1,107		6,811		5,113
Prepayment penalty fee income	1,915		2,072		4,535		4,014
Gain on acquisition	—		—		92,397		—
Total non-interest income	33,163		32,246		191,799		87,783
NON-INTEREST EXPENSE:
Salaries and related costs	67,419		53,046		182,113		149,762
Data and operational processing	18,243		15,808		52,653		44,462
Depreciation and amortization	7,221		5,671		19,587		17,722
Advertising and promotional	10,282		11,786		30,451		29,055
Professional services	9,073		6,747		24,860		23,289
Occupancy and equipment	4,254		3,873		12,101		11,610
FDIC and regulatory fees	5,232		3,859		13,616		11,163
Broker-dealer clearing charges	4,459		3,356		14,419		9,924
General and administrative expense	7,045		6,898		25,773		38,171
Total non-interest expense	133,228		111,044		375,573		335,158
INCOME BEFORE INCOME TAXES	155,541		114,684		491,093		314,741
INCOME TAXES	44,821		34,834		145,957		94,932
NET INCOME	$	110,720	$	79,850	$	345,136	$	219,809
COMPREHENSIVE INCOME	$	111,575	$	81,222	$	348,682	$	217,169
Basic earnings per common share	$	1.94	$	1.33	$	5.98	$	3.67
Diluted earnings per common share	$	1.91	$	1.32	$	5.88	$	3.63

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
(Dollars in thousands)	2024		2023		2024		2023
NET INCOME	$	110,720	$	79,850	$	345,136	$	219,809
Net unrealized gain (loss) from available-for-sale securities, net of income tax expense (benefit) of $ 356 and $ 588 for the three months ended and $ 1,526 and $( 1,130 ) for the nine months ended March 31, 2024 and 2023, respectively.	855		1,372		3,546		( 2,640 )


Other comprehensive income (loss)	855		1,372		3,546		( 2,640 )
COMPREHENSIVE INCOME	$	111,575	$	81,222	$	348,682	$	217,169

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)


			For the Three Months Ended March 31, 2024
	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Retained Earnings		Treasury Stock		Total
		Number of Shares
(Dollars in thousands)			Issued	Treasury	Outstanding											Amount
BALANCE—December 31, 2023			69,828,709	( 12,930,332 )	56,898,377	$	698	$	493,268	$	( 3,919 )	$	1,970,025	$	( 381,848 )		$	2,078,224
Net income			—	—	—	—		—		—		110,720		—			110,720
Other comprehensive income (loss)			—	—	—	—		—		855		—		—			855
Purchase of treasury stock			—	( 12,101 )	( 12,101 )	—		—		—		—		( 595 )			( 595 )
Stock-based compensation activity			204,814	( 11,661 )	193,153	2		9,221		—		—		( 2,134 )			7,089
BALANCE—March 31, 2024			70,033,523	( 12,954,094 )	57,079,429	$	700	$	502,489	$	( 3,064 )	$	2,080,745	$	( 384,577 )		$	2,196,293


			For the Nine Months Ended March 31, 2024
	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Retained Earnings		Treasury Stock		Total
		Number of Shares
(Dollars in thousands)			Issued	Treasury	Outstanding											Amount
BALANCE—June 30, 2023			69,465,446	( 10,522,411 )	58,943,035	$	695	$	479,878	$	( 6,610 )	$	1,735,609	$	( 292,413 )		$	1,917,159
Net income			—	—	—	—		—		—		345,136		—			345,136
Other comprehensive income (loss)			—	—	—	—		—		3,546		—		—			3,546
Purchase of treasury stock			—	( 2,267,610 )	( 2,267,610 )	—		—		—		—		( 83,781 )			( 83,781 )
Stock-based compensation activity			568,077	( 164,073 )	404,004	5		22,611		—		—		( 8,383 )			14,233
BALANCE—March 31, 2024			70,033,523	( 12,954,094 )	57,079,429	$	700	$	502,489	$	( 3,064 )	$	2,080,745	$	( 384,577 )		$	2,196,293

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(Unaudited)


			For the Three Months Ended March 31, 2023
	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Retained Earnings		Treasury Stock		Total
		Number of Shares
(Dollars in thousands)			Issued	Treasury	Outstanding											Amount
BALANCE—December 31, 2022			69,153,591	( 9,153,512 )	60,000,079	$	692	$	465,350	$	( 6,945 )	$	1,568,403	$	( 239,941 )		$	1,787,559
Net income			—	—	—	—		—		—		79,850		—			79,850
Other comprehensive income (loss)			—	—	—	—		—		1,372		—		—			1,372
Purchase of treasury stock			—	( 849,081 )	( 849,081 )	—		—		—		—		( 31,605 )			( 31,605 )
Stock-based compensation activity			186,942	17,184	204,126	2		7,583		—		—		( 657 )			6,928
BALANCE—March 31, 2023			69,340,533	( 9,985,409 )	59,355,124	$	694	$	472,933	$	( 5,573 )	$	1,648,253	$	( 272,203 )		$	1,844,104


			For the Nine Months Ended March 31, 2023
	Common Stock					Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss), Net of Income Tax		Retained Earnings		Treasury Stock		Total
		Number of Shares
(Dollars in thousands)			Issued	Treasury	Outstanding											Amount
BALANCE—June 30, 2022			68,859,722	( 9,081,773 )	59,777,949	$	689	$	453,784	$	( 2,933 )	$	1,428,444	$	( 237,011 )		$	1,642,973
Net income			—	—	—	—		—		—		219,809		—			219,809
Other comprehensive income (loss)			—	—	—	—		—		( 2,640 )		—		—			( 2,640 )
Purchase of treasury stock			—	( 849,081 )	( 849,081 )	—		—		—		—		( 31,605 )			( 31,605 )
Stock-based compensation activity			480,811	( 54,555 )	426,256	5		19,149		—		—		( 3,587 )			15,567
BALANCE—March 31, 2023			69,340,533	( 9,985,409 )	59,355,124	$	694	$	472,933	$	( 5,573 )	$	1,648,253	$	( 272,203 )		$	1,844,104

See accompanying notes to the condensed consolidated financial statements.

Table of Contents


AXOS FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	March 31,
(Dollars in thousands)	2024		2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	345,136	$	219,809
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	19,587		17,722
Other accretion and amortization	( 37,917 )		( 624 )
Stock-based compensation expense	22,616		19,154
Trading activity	166		1,358
Provision for credit losses	26,500		17,251
Deferred income taxes	( 15,005 )		( 10,274 )
Origination of loans held for sale	( 144,731 )		( 158,500 )
Unrealized and realized gains on loans held for sale	( 6,089 )		( 5,650 )
Proceeds from sale of loans held for sale	154,892		160,696
Changes in servicing rights	( 1,803 )		375
Gain on FDIC Loan Purchase	( 92,397 )		—
Gain on repurchase of subordinated notes	( 742 )		—








Net change in assets and liabilities which provide (use) cash:
Securities borrowed	28,486		251,687
Customer, broker-dealer and clearing receivables	81,444		94,058
Other Assets	( 51,254 )		( 29,287 )
Securities loaned	( 40,032 )		( 359,787 )
Customer, broker-dealer and clearing payables	( 58,301 )		( 105,562 )
Accounts payable and other liabilities	31,154		6,821



Net cash provided by operating activities	261,710		119,247
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of available-for-sale securities	( 9,612 )		( 30,000 )
Proceeds from sale and repayment of available-for-sale securities	39,391		9,735
Purchase of stock of regulatory agencies	—		( 108,724 )
Proceeds from redemption of stock of regulatory agencies	—		108,724
Origination of loans held for investment	( 8,040,181 )		( 6,235,451 )
Proceeds from sale of loans originally classified as held for investment	—		14,185
Mortgage warehouse loan activity, net	90,708		118,185
Proceeds from sale of other real estate owned and repossessed assets	4,401		2,311
Proceeds from BOLI claim settlement	—		2,778
Acquisition of business activity, net of cash acquired	—		( 5,531 )
Purchase of loans and leases, net of discounts and premiums	( 841,408 )		( 914 )
Principal repayments on loans	6,626,839		4,336,424
Purchases of furniture, equipment, software and intangibles	( 25,473 )		( 19,698 )



Net cash used in investing activities	( 2,155,335 )		( 1,807,976 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	1,980,424		2,792,446

Repayments of the Federal Home Loan Bank term advances	—		( 27,500 )

Net (repayment) proceeds of other borrowings	( 27,200 )		( 111,500 )


Tax payments related to settlement of restricted stock units	( 8,383 )		( 3,587 )
Purchase of treasury stock	( 83,178 )		( 31,605 )
Repurchase of subordinated notes	( 4,213 )		—










Net cash provided by financing activities	1,857,450		2,618,254

Table of Contents


AXOS FINANCIAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	March 31,
(Dollars in thousands)	2024		2023
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	( 36,175 )		929,525
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of year	$	2,382,086	$	1,574,699
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period	$	2,345,911	$	2,504,224
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on interest-bearing liabilities	502,364		228,369
Income taxes paid	144,086		108,272
Transfers to other real estate and repossessed vehicles from loans held for investment	4,118		8,206
Transfers from loans held for investment to loans held for sale	—		14,185
Transfers from loans held for sale to loans and leases held for investment	2,783		690



Operating lease liabilities from obtaining right of use assets	5,767		1,110

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

AXOS FINANCIAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH AND NINE MONTH PERIODS ENDED MARCH 31, 2024 AND 2023

(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”), its wholly owned subsidiaries, and the activities of two lending-related trust entities constitute the Banking Business segment, and Axos Nevada Holding, LLC (“Axos Nevada Holding”) and its wholly owned subsidiaries constitute the Securities Business segment. All significant intercompany balances and transactions have been eliminated in consolidation. The Notes to the Condensed Consolidated Financial Statements are an integral part of the Company’s financial statements.

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. Certain amounts reported in prior periods have been reclassified to conform with the current presentation. Results for the three and nine months ended March 31, 2024 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 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, 2023 included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023 (“2023 Form 10-K”) filed with the SEC.

Significant Accounting Policies

For further information regarding the Company’s significant accounting policies see Note 1 — “Organizations and Summary of Significant Accounting Policies” in the 2023 Form 10-K. During the three and nine months ended March 31, 2024, there were no significant updates to the Company’s significant accounting policies, other than as noted below and the adoption of the accounting standards noted herein.

Purchased Credit Deteriorated (“PCD”) Loans. Purchased loans that reflect a more-than-insignificant deterioration of credit since their origination are considered PCD. For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit losses on the date of acquisition. The initial amortized cost of PCD loans is determined by reducing the loans’ par value by the acquisition date estimate of expected credit losses with any difference between the resulting amount and the loans’ purchase price recorded as a non-credit-related discount. Subsequent changes in the initial estimate of expected credit losses are recognized in the provision for credit losses in the Company’s Consolidated Statements of Income.

Restricted cash. Restricted cash includes qualified deposits in special reserve bank accounts for the exclusive benefit of Axos Clearing customers in accordance with Rule 15c3-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other regulations. Restricted cash also includes certain other cash balances which are restricted as to the Company’s withdrawal or usage based upon the terms of the corresponding agreements.

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New Accounting Standards

Recently Adopted Accounting Standards

The Financial Accounting Standards Board (“FASB”) issued three Accounting Standards Updates (“ASUs”) (2020-04, 2021-04 and 2022-06) all of which provide guidance to alleviate the burden in accounting for reference rate reform by allowing certain expedients and exceptions in applying generally accepted accounting principles to contracts, hedging relationships, and other transactions impacted by 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 provisions are optional and are effective from March 12, 2020 through December 31, 2024. The Company adopted these ASUs on July 1, 2023, and there was no impact on its financial condition or results of operations upon adoption.

In March 2022, the FASB issued ASU 2022-02 which eliminated the accounting guidance for troubled debt restructurings by creditors that have adopted the current expected credit losses (“CECL”) model and enhanced 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 Company adopted this ASU on a prospective basis on July 1, 2023, and there was no impact on its financial condition or results of operations upon adoption. See Note 5 — “Loans & Allowance for Credit Losses” for the new disclosures as a result of the adoption of this accounting guidance.

Accounting Standards Issued But Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07 which requires disclosure of significant business segment expenses and a description of the composition of other segment expenses by business segment. The ASU also requires disclosure of the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. This standard is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company does not expect any impact on its financial condition or results of operations upon adoption.

In December 2023, the FASB issued ASU 2023-09 which requires further granularity on the disclosure of income taxes, including:

• Certain prescribed line items in the income tax rate reconciliation presented both in dollar and percentage terms;

• Income taxes paid, income before income taxes and income taxes disaggregated by federal, state and foreign taxes; and

• Further disaggregation of income taxes paid by any individual jurisdiction equal to or exceeding five percent of total income taxes paid.

This standard is effective for fiscal years beginning after December 15, 2024. The Company does not expect any impact on its financial condition or results of operations upon adoption.

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2. ACQUISITIONS

On August 23, 2023, the Company acquired approximately $ 52 million of marine floor financing loans at par value along with other assets for an additional $ 2 million, primarily consisting of servicing rights and the addition of certain employees. The transaction was accounted for as an asset acquisition and such assets are included in the Company’s unaudited Condensed Consolidated Balance Sheets as of March 31, 2024.

On December 7, 2023, the Company acquired from the Federal Deposit Insurance Corporation (“FDIC”) two loan portfolios, comprising both PCD and non-PCD loans, with an aggregate unpaid principal balance of $ 1.3 billion at a fair value of $ 901.5 million, reflecting a non-credit-related discount of $ 306.8 million and an allowance for credit losses on PCD loans of $ 70.1 million, (the “FDIC Loan Purchase”). Also included in the acquisition were certain related interest rate derivative assets and liabilities with a fair value of $ 109.0 million and $ 104.4 million, respectively, as of the date of the acquisition and whose maturities generally align with those of the loans acquired. The acquisition of the non-PCD loans and interest rate derivatives was accounted for as a purchase of financial assets and liabilities, and the Company recognized a $ 92.4 million gain on the transaction included in “Gain on acquisition” in the Unaudited Condensed Consolidated Statement of Income.

For additional information on PCD loans, see Note 1 — “Summary of Significant Accounting Policies,” and for additional information on the Company’s loans and derivative instruments, see Note 5 — “Loans & Allowance Credit Losses” and Note 6 — “Derivatives,” respectively.

The following table summarizes the PCD loans acquired in the FDIC Loan Purchase:


(Dollars in thousands)	Total
Unpaid principal balance	$	341,301
Non-credit discount	( 100,686 )
Allowance for credit losses at acquisition	( 70,097 )
Purchase price	$	170,518

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3. FAIR VALUE

The following tables set forth the Company’s financial assets and liabilities measured at fair value on a recurring basis at March 31, 2024 and June 30, 2023. Assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement:


	March 31, 2024
(Dollars in thousands)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
ASSETS:
Trading securities		$	592	$	—	$	592
Available-for-sale securities:

Agency MBS		27,481		—		27,481
Non-Agency MBS		—		176,679		176,679
Municipal		3,422		—		3,422

Total—Available-for-sale securities:		$	30,903	$	176,679	$	207,582
Loans held for sale		$	16,239	$	—	$	16,239
Servicing rights		$	—	$	28,130	$	28,130
Other assets—Derivative instruments		$	106,392	$	—	$	106,392
LIABILITIES:
Accounts payable and other liabilities—Derivative instruments		$	102,635	$	—	$	102,635

	June 30, 2023
(Dollars in thousands)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
ASSETS:
Trading securities		$	758	$	—	$	758
Available-for-sale securities:

Agency MBS		23,947		—		23,947
Non-Agency MBS		—		205,005		205,005
Municipal		3,398		—		3,398

Total—Available-for-sale securities:		$	27,345	$	205,005	$	232,350
Loans held for sale		$	23,203	$	—	$	23,203
Servicing rights		$	—	$	25,443	$	25,443
Other assets—Derivative instruments		$	919	$	—	$	919
LIABILITIES:
Accounts payable and other liabilities—Derivative instruments		$	691	$	—	$	691

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


	For the Three Months Ended
	March 31, 2024
(Dollars in thousands)	Available-for-sale Securities: Non-Agency MBS		Servicing Rights 1		Total
Opening balance	$	207,708	$	28,043	$	235,751


Total gains or losses for the period:


Included in earnings—Mortgage banking and servicing rights income	—		( 152 )		( 152 )
Included in other comprehensive income	1,517		—		1,517
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	—		239		239


Settlements	( 32,546 )		—		( 32,546 )
Closing balance	$	176,679	$	28,130	$	204,809

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	( 152 )	$	( 152 )


	For the Nine Months Ended
	March 31, 2024
(Dollars in thousands)	Available-for-sale Securities: Non-Agency MBS		Servicing Rights 1		Total
Opening Balance	$	205,005	$	25,443	$	230,448


Total gains or losses for the period:


Included in earnings—Mortgage banking and servicing rights income	—		213		213
Included in other comprehensive income	4,708		—		4,708
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	—		2,474		2,474


Settlements	( 33,034 )		—		( 33,034 )
Closing balance	$	176,679	$	28,130	$	204,809

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	213	$	213

1 Earnings from servicing rights were attributable to: time and payoffs, representing a decrease in servicing rights 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 $ 0.4 million and $ 0.9 million for the three and nine months ended March 31, 2024 and an increase in servicing rights value resulting from market-driven changes in interest rates of $ 0.2 million for the three months ended March 31, 2024 and an increase of $ 1.1 million for the nine months ended March 31, 2024. Additions to servicing rights were related to purchases and servicing rights retained upon sale of loans held for sale.


	For the Three Months Ended
	March 31, 2023
(Dollars in thousands)	Available-for-sale Securities: Non-Agency MBS		Servicing Rights 1		Derivative Instruments, net		Total
Opening balance	$	175,123	$	25,526	$	18	$	200,667


Total gains or losses for the period:


Included in earnings—Mortgage banking and servicing rights income	—		( 282 )		( 674 )		( 956 )
Included in other comprehensive income	1,231		—		—		1,231
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	30,000		152		—		30,152


Settlements	( 54 )		—		—		( 54 )
Closing balance	$	206,300	$	25,396	$	( 656 )	$	231,040

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	( 282 )	$	( 674 )	$	( 956 )

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	For the Nine Months Ended
	March 31, 2023
(Dollars in thousands)	Available-for-sale Securities: Non-Agency MBS		Servicing Rights 1		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 and servicing rights income	—		( 375 )		( 1,120 )		( 1,495 )
Included in other comprehensive income	( 3,384 )		—		—		( 3,384 )
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions	30,000		558		—		30,558


Settlements	( 7,130 )		—		—		( 7,130 )
Closing balance	$	206,300	$	25,396	$	( 656 )	$	231,040

Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period	$	—	$	( 375 )	$	( 1,120 )	$	( 1,495 )

1 Earnings from servicing rights were attributable to: time and payoffs, representing a decrease in servicing rights 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 $ 0.2 million and $ 0.7 million for the three and nine months ended March 31, 2023, respectively, and a decrease in servicing rights value resulting from market-driven changes in interest rates of $ 0.1 million for the three months ended March 31, 2023 and an increase of $ 0.3 million for the nine months ended March 31, 2023. Additions to servicing rights were retained upon sale of loans held for sale.

The table below summarizes the quantitative information about Level 3 fair value measurements:

March 31, 2024

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average) 1

Available-for-sale securities: Non-Agency MBS

176,679

Discounted Cash Flow

Projected Constant Prepayment Rate,

Projected Constant Default Rate,

Projected Loss Severity,

Discount Rate over SOFR Swaps

0.0 to 62.3 % ( 42.8 %)

0.0 to 25.6 % ( 2.9 %)

0.0 to 68.7 % ( 33.7 %)

2.5 to 6.5 % ( 2.5 %)

Servicing Rights

28,130

Discounted Cash Flow

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

5.5 to 95.2 % ( 11.8 %)

0.4 to 14.9 ( 7.9 )

9.5 to 11.2 % ( 9.8 %)

June 30, 2023

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average) 1

Available-for-sale securities:

Non-Agency MBS

205,005

Discounted Cash Flow

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

0.0 to 59.7 % ( 32.0 %)

0.0 to 7.5 % ( 2.4 %)

0.0 to 68.7 % ( 28.5 %)

2.6 to 7.5 % ( 2.7 %)

Servicing Rights

25,443

Discounted Cash Flow

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

6.1 to 40.1 % ( 12.6 %)

1.8 to 10.9 ( 7.7 )

9.5 to 11.5 % ( 9.6 %)

1 The weighted average for Available-for-sale securities: Non-agency MBS is based on the relative fair value of the securities and for Servicing Rights is based on the relative unpaid principal of the loans being serviced.

For non-agency mortgage-backed securities, 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. For servicing rights, significant increases in projected prepayment rates or discount rates in isolation would result in a significantly lower fair value measurement, while a significant increase in expected life in isolation would result in a significantly higher fair value measurement. Generally, a change in the projected prepayment rates is accompanied by a directionally opposite change in expected life.

The aggregate fair value of loans held for sale, carried at fair value, the contractual balance (including accrued interest), and the unrealized gain were:


(Dollars in thousands)	March 31, 2024		June 30, 2023
Aggregate fair value	$	16,239	$	23,203
Contractual balance	15,784		22,844
Unrealized gain	$	455	$	359

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The total interest income and amount of gains and losses from changes in fair value included in earnings for loans held for sale were:


	For the Three Months Ended				For the Nine Months Ended
	March 31,				March 31,
(Dollars in thousands)	2024		2023		2024		2023
Interest income	$	208	$	99	$	538	$	252
Change in fair value	118		51		22		( 280 )
Total	$	326	$	150	$	560	$	( 28 )

The table below summarizes assets measured at fair value on a non-recurring basis:


	March 31, 2024
(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 repossessed vehicles:
Single family real estate	$	—	$	—	$	1,765	$	1,765

Autos	—		—		1,102		1,102
Total	$	—	$	—	$	2,867	$	2,867

	June 30, 2023
(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 repossessed vehicles:
Single family real estate	$	—	$	—	$	5,574	$	5,574
Multifamily real estate	—		—		1,392		1,392
Autos	—		—		1,133		1,133
Total	$	—	$	—	$	8,099	$	8,099

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 $ 2.9 million at March 31, 2024, after write-downs of $ 1.7 million, and a net carrying amount of $ 8.1 million at June 30, 2023, after write-downs of $ 1.7 million.

The following table presents quantitative information about Level 3 fair value measurements for other real estate owned measured at fair value on a non-recurring basis:

March 31, 2024

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average) 1

Other real estate owned:

Single family real estate

1,765

Sales comparison approach

Differences between the comparable sales

79.7 to 97.4 % ( 79.7 %)

June 30, 2023

(Dollars in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average) 1

Other real estate owned:

Single family real estate

5,574

Sales comparison approach

Differences between the comparable sales

62.1 to 93.6 % ( 62.1 %)

Multifamily real estate

1,392

Sales comparison approach and income approach

Differences between the comparable sales and differences in net operating income expectations, capitalization rate

49.8 to 54.5 % ( 49.8 %)

1 For other real estate owned 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 asset being valued having limited comparable sales with similar characteristics at the time the current appraisal is conducted. The weighted average is based on the relative fair value of comparable sales.

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Fair Value of Financial Instruments

Carrying amounts and estimated fair values of financial instruments at March 31, 2024 and June 30, 2023 were:


	March 31, 2024
			Fair Value
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:
Cash, cash equivalents and restricted cash	$	2,345,911	$	2,345,911	$	—	$	—	$	2,345,911
Trading securities	592		—		592		—		592
Available-for-sale securities	207,582		—		30,903		176,679		207,582
Stock of regulatory agencies	22,264		—		22,264		—		22,264
Loans held for sale, at fair value	16,239		—		16,239		—		16,239

Loans held for investment—net	18,733,455		—		—		18,692,795		18,692,795
Securities borrowed	105,853		—		—		111,696		111,696
Customer, broker-dealer and clearing receivables	292,630		—		—		303,516		303,516
Servicing rights	28,130		—		—		28,130		28,130
Other assets - derivative instruments	106,392		—		106,392		—		106,392
Financial liabilities:
Total deposits	19,103,532		—		19,006,497		—		19,006,497
Advances from the Federal Home Loan Bank	90,000		—		83,966		—		83,966
Borrowings, subordinated notes and debentures	330,389		—		303,856		—		303,856
Securities loaned	119,800		—		—		119,584		119,584
Customer, broker-dealer and clearing payables	387,176		—		—		387,176		387,176
Accounts payable and other liabilities - derivative instruments	102,635		—		102,635		—		102,635


	June 30, 2023
			Fair Value
(Dollars in thousands)	Carrying Amount		Level 1		Level 2		Level 3		Total Fair Value
Financial assets:
Cash, cash equivalents and restricted cash	$	2,382,086	$	2,382,086	$	—	$	—	$	2,382,086
Trading securities	758		—		758		—		758
Available-for-sale securities	232,350		—		27,345		205,005		232,350
Stock of regulatory agencies	21,510		—		21,510		—		21,510
Loans held for sale, at fair value	23,203		—		23,203		—		23,203
Loans held for sale, at lower of cost or fair value	776		—		—		780		780
Loans held for investment—net	16,456,728		—		—		16,417,183		16,417,183
Securities borrowed	134,339		—		—		143,461		143,461
Customer, broker-dealer and clearing receivables	374,074		—		—		386,082		386,082
Servicing rights	25,443		—		—		25,443		25,443
Other assets - derivative instruments	919		—		919		—		919
Financial liabilities:
Total deposits	17,123,108		—		17,064,084		—		17,064,084
Advances from the Federal Home Loan Bank	90,000		—		83,192		—		83,192
Borrowings, subordinated notes and debentures	361,779		—		327,564		—		327,564
Securities loaned	159,832		—		—		159,416		159,416
Customer, broker-dealer and clearing payables	445,477		—		—		445,447		445,447
Accounts payable and other liabilities - derivative instruments	691		—		691		—		691

The carrying amount represents the estimated fair value for cash and cash equivalents and restricted cash, stock of regulatory agencies, 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, loans held for sale and derivatives can be found in Note 3 — “Fair Value” of the 2023 Form 10-K. The fair value of off-balance sheet items is not significant.

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4. AVAILABLE-FOR-SALE SECURITIES

The amortized cost and fair value of available-for-sale securities were:


	March 31, 2024
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (MBS):
Agency 1	$	30,121	$	122	$	( 2,762 )	$	27,481
Non-agency 2	177,236		950		( 1,507 )		176,679
Total mortgage-backed securities	207,357		1,072		( 4,269 )		204,160


Municipal	3,754		—		( 332 )		3,422


Total available-for-sale securities	$	211,111	$	1,072	$	( 4,601 )	$	207,582



	June 30, 2023
(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses		Fair Value
Mortgage-backed securities (MBS):
Agency 1	$	27,024	$	—	$	( 3,077 )	$	23,947
Non-agency 2	210,271		711		( 5,977 )		205,005
Total mortgage-backed securities	237,295		711		( 9,054 )		228,952


Municipal	3,656		—		( 258 )		3,398


Total available-for-sale securities	$	240,951	$	711	$	( 9,312 )	$	232,350

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

2 Private 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.

No credit losses were recognized on available-for-sale securities in the three and nine months ended March 31, 2024 and March 31, 2023. Based on the underlying government guarantees and other credit protection supporting the Company’s securities, no allowance for credit losses for available-for-sale securities was recorded at March 31, 2024 and June 30, 2023. The Company has no allowance for the available-for-sale securities in an unrealized loss position based on an analysis of: (1) the credit characteristics of the securities, including the forecasted cash flows, credit ratings, credit enhancement, and external government backing, as applicable, 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 unrealized losses on available-for-sale securities are primarily driven by the increase in interest rates since the securities were purchased.

The face amounts of available-for-sale securities pledged to secure borrowings at March 31, 2024 and June 30, 2023 were $ 0.8 million and $ 0.9 million, respectively.

During the nine months ended March 31, 2024, the Company sold a $ 4.8 million available-for-sale security with no realized gain or loss. There were no sales of available-for sale securities during the three months ended March 31, 2024 and 2023, and during the nine months ended March 31, 2023.

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Securities in an unrealized loss position based on the length of time the individual securities have been in a continuous unrealized loss position were:


	March 31, 2024
	Available-for-sale securities in loss position for
	Less Than 12 Months				More Than 12 Months				Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
MBS:
Agency	$	2,650	$	( 26 )	$	19,725	$	( 2,736 )	$	22,375	$	( 2,762 )
Non-agency	10,407		( 27 )		133,506		( 1,480 )		143,913		( 1,507 )
Total MBS	13,057		( 53 )		153,231		( 4,216 )		166,288		( 4,269 )


Municipal	—		—		3,422		( 332 )		3,422		( 332 )


Total available-for-sale securities	$	13,057	$	( 53 )	$	156,653	$	( 4,548 )	$	169,710	$	( 4,601 )

	June 30, 2023
	Available-for-sale securities in loss position for
	Less Than 12 Months				More Than 12 Months				Total
(Dollars in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
MBS:
Agency	$	3,182	$	( 16 )	$	20,642	$	( 3,061 )	$	23,824	$	( 3,077 )
Non-agency	107,982		( 1,808 )		95,385		( 4,169 )		203,367		( 5,977 )
Total MBS	111,164		( 1,824 )		116,027		( 7,230 )		227,191		( 9,054 )


Municipal	—		—		3,398		( 258 )		3,398		( 258 )


Total available-for-sale securities	$	111,164	$	( 1,824 )	$	119,425	$	( 7,488 )	$	230,589	$	( 9,312 )

The components of the Company’s accumulated other comprehensive income (loss) are as follows:


(Dollars in thousands)	March 31, 2024		June 30, 2023
Available-for-sale securities—net unrealized gains (losses)	$	( 3,529 )	$	( 8,601 )
Available-for-sale securities—non-credit related	( 845 )		( 845 )
Subtotal	( 4,374 )		( 9,446 )
Tax benefit (expense)	1,310		2,836
Net unrealized gain (loss) on investment securities in accumulated other comprehensive income (loss)	$	( 3,064 )	$	( 6,610 )

The following table sets forth the expected maturity distribution of our mortgage-backed securities, which is based on assumed prepayment rates, and the maturity distribution of our municipal securities, which is based on the contractual maturity:


	As of March 31, 2024
(Dollars in thousands)	Total Amount		Due Within One Year		Due after One but within Five Years		Due after Five but within Ten Years		Due After Ten Years
MBS:
Agency	$	30,121	$	7,085	$	13,840	$	6,950	$	2,246
Non-Agency	$	177,236	$	153,214	$	21,652	$	1,322	$	1,048
Total MBS	$	207,357	$	160,299	$	35,492	$	8,272	$	3,294

Municipal	$	3,754	$	—	$	—	$	—	$	3,754

Available-for-sale—Amortized cost	$	211,111	$	160,299	$	35,492	$	8,272	$	7,048
Available-for-sale—Fair value	$	207,582	$	158,860	$	34,292	$	7,794	$	6,636

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5. LOANS & ALLOWANCE FOR CREDIT LOSSES

The Company categorizes the loan portfolio into six segments: Single Family - Mortgage & Warehouse, Multifamily and Commercial Mortgage, Commercial Real Estate, Commercial & Industrial - Non Real Estate, Auto & Consumer and Other. For further detail of the segments of the Company’s loan portfolio, refer to Note 1 — “Organizations and Summary of Significant Accounting Policies” in the 2023 Form 10-K.

The following table sets forth the composition of the loan portfolio:


(Dollars in thousands)	March 31, 2024		June 30, 2023
Single Family - Mortgage & Warehouse	$	4,122,726	$	4,173,833
Multifamily and Commercial Mortgage 1	4,001,056		3,082,225
Commercial Real Estate 1	5,912,988		6,199,818
Commercial & Industrial - Non-RE	4,827,531		2,639,650
Auto & Consumer	450,765		546,264
Other	1,896		10,236

Total gross loans	19,316,962		16,652,026
Allowance for credit losses - loans	( 257,522 )		( 166,680 )
Unaccreted premiums (discounts) and loan fees	( 325,985 )		( 28,618 )
Total net loans	$	18,733,455	$	16,456,728

1 Includes PCD loans of $ 285.4 million in Multifamily and Commercial Mortgage and $ 44.5 million in Commercial Real Estate as of March 31, 2024. For further detail on PCD loans refer to Note 1—“Summary of Significant Accounting Policies”.

Accrued interest receivable on loans held for investments totaled $ 103.3 million and $ 77.9 million as of March 31, 2024 and June 30, 2023, respectively.

At March 31, 2024 and June 30, 2023, the Company has pledged certain loans totaling $ 5,226.4 million and $ 5,128.4 million, respectively, to the Federal Home Loan Bank (“FHLB”) and $ 7,834.9 million and $ 3,689.5 million, respectively, to the Federal Reserve Bank of San Francisco (“FRBSF”).

The following table presents the components of the provision for credit losses:


	For the Three Months Ended				For the Nine Months Ended
	March 31,				March 31,
(Dollars in thousands)	2024		2023		2024		2023
Provision for credit losses - loans	$	9,000	$	5,500	$	27,250	$	17,750
Provision for credit losses - unfunded lending commitments	( 3,000 )		—		( 750 )		( 499 )
Total provision for credit losses	$	6,000	$	5,500	$	26,500	$	17,251

The following tables summarize activity in the allowance for credit losses - loans by portfolio segment:


	For the Three Months Ended March 31, 2024
(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, 2024	$	15,356	$	78,353	$	77,778	$	69,201	$	11,052	$	9	$	251,749
Allowance for credit losses at acquisition of PCD loans	—		—		—		—		—		—		—
Provision (benefit) for credit losses - loans	1,629		( 1,856 )		5,064		2,809		1,355		( 1 )		9,000
Charge-offs	( 90 )		( 139 )		—		—		( 3,776 )		—		( 4,005 )
Recoveries	70		—		—		—		708		—		778
Balance at March 31, 2024	$	16,965	$	76,358	$	82,842	$	72,010	$	9,339	$	8	$	257,522

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	For the Three Months Ended March 31, 2023
(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, 2023	$	19,631	$	15,457	$	72,168	$	36,038	$	13,903	$	21	$	157,218

Provision (benefit) for credit losses - loans	( 1,583 )		( 1,156 )		( 3,782 )		10,698		1,329		( 6 )		5,500
Charge-offs	( 9 )		—		—		—		( 2,413 )		—		( 2,422 )
Recoveries	413		—		—		—		584		—		997
Balance at March 31, 2023	$	18,452	$	14,301	$	68,386	$	46,736	$	13,403	$	15	$	161,293


	For the Nine Months Ended March 31, 2024
(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, 2023	$	17,503	$	16,848	$	72,755	$	46,347	$	13,212	$	15	$	166,680
Allowance for credit losses at acquisition of PCD loans	—		58,972		11,125		—		—		—		70,097
Provision (benefit) for credit losses - loans	( 461 )		677		( 1,038 )		25,749		2,330		( 7 )		27,250
Charge-offs	( 170 )		( 139 )		—		( 86 )		( 8,378 )		—		( 8,773 )
Recoveries	93		—		—		—		2,175		—		2,268
Balance at March 31, 2024	$	16,965	$	76,358	$	82,842	$	72,010	$	9,339	$	8	$	257,522


	For the Nine Months Ended March 31, 2023
(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, 2022	$	19,670	$	14,655	$	69,339	$	30,808	$	14,114	$	31	$	148,617

Provision (benefit) for credit losses - loans	( 1,347 )		( 354 )		( 953 )		15,910		4,510		( 16 )		17,750
Charge-offs	( 307 )		—		—		—		( 6,646 )		—		( 6,953 )
Recoveries	436		—		—		18		1,425		—		1,879
Balance at March 31, 2023	$	18,452	$	14,301	$	68,386	$	46,736	$	13,403	$	15	$	161,293

For the three months ended March 31, 2024, the allowance for credit losses for loans increased primarily due to loan growth in the Commercial & Industrial - Non-RE portfolio and an increase in the Commercial Real Estate portfolio reflecting changes in the underlying macroeconomic variables. For the nine months ended March 31, 2024, the increase in the provision for credit losses was primarily due to loan growth in the Commercial & Industrial - Non-RE portfolio and the loans acquired in the FDIC Loan Purchase.

L oan products within each portfolio contain varying collateral types which impact the estimate of the loss given default utilized in the calculation of the allowance. For further discussion of the model method of estimating expected lifetime credit losses to Note 1 — “Organizations and Summary of Significant Accounting Policies” within the 2023 Form 10-K.

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The following tables present a summary of the activity in the allowance for credit losses for off-balance sheet lending commitments:


	Three Months Ended March 31,
(Dollars in thousands)	2024		2023
Balance at January 1,	$	12,723	$	10,474
Provision for credit losses - unfunded lending commitments	( 3,000 )		—
Balance at March 31,	$	9,723	$	10,474

	Nine Months Ended March 31,
(Dollars in thousands)	2024		2023
Balance at July 1,	$	10,473	$	10,973
Provision for credit losses - unfunded lending commitments	( 750 )		( 499 )
Balance at March 31,	$	9,723	$	10,474

The decrease in the allowance for off-balance sheet lending commitments for the three and nine months ended March 31, 2024, was primarily driven by a change in the underlying mix of Commercial & Industrial - Non-RE unfunded commitments.

The following table presents loan-to-value (“LTV”) for the Company’s real estate loans outstanding as of March 31, 2024:


	Total Real Estate Loans		Single Family - Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate
Weighted-Average LTV	48.8	%	56.2	%	55.2	%	39.4	%
Median LTV	53.1	%	55.0	%	50.0	%	42.0	%

The Company’s effective weighted-average LTV was 45.2 % for loans within its real estate portfolio originated during the three months ended March 31, 2024.

Credit Quality Disclosures. The following tables provide the composition of loans that are performing and nonaccrual by portfolio segment:


	March 31, 2024
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	$	4,071,384	$	3,962,591	$	5,886,886	$	4,823,511	$	448,614	$	1,896	$	19,194,882
Nonaccrual	$	51,342	$	38,465	$	26,102	$	4,020	$	2,151	$	—	$	122,080
Total	$	4,122,726	$	4,001,056	$	5,912,988	$	4,827,531	$	450,765	$	1,896	$	19,316,962
Nonaccrual loans to total loans													0.63		%


	June 30, 2023
(Dollars in thousands)	Single Family-Mortgage & Warehouse		Multifamily and Commercial Mortgage		Commercial Real Estate		Commercial & Industrial - Non-RE		Auto & Consumer		Other		Total
Performing	$	4,143,119	$	3,047,122	$	6,184,966	$	2,636,661	$	544,807	$	8,191	$	16,564,866
Nonaccrual	30,714		35,103		14,852		2,989		1,457		2,045		87,160
Total	$	4,173,833	$	3,082,225	$	6,199,818	$	2,639,650	$	546,264	$	10,236	$	16,652,026
Nonaccrual loans to total loans													0.52		%

There were no nonaccrual loans without an allowance for credit losses as of March 31, 2024 and June 30, 2023. There was no interest income recognized on nonaccrual loans in the three and nine months ended March 31, 2024 and 2023.

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

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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.

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The following tables present the composition of loans by portfolio segment, fiscal year of origination and credit quality indicator, and the amount of gross charge-offs for the nine months ended March 31, 2024 :


	March 31, 2024
	Loans Held for Investment by Fiscal Year of Origination												Revolving Loans		Total
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior
Single Family-Mortgage & Warehouse
Pass	$	374,277	$	629,673	$	1,267,368	$	497,858	$	301,300	$	759,811	$	159,109	$	3,989,396
Special Mention	31,000		—		—		—		9,015		20,706		—		60,721
Substandard	—		284		7,323		—		14,345		50,657		—		72,609
Doubtful	—		—		—		—		—		—		—		—
Total	405,277		629,957		1,274,691		497,858		324,660		831,174		159,109		4,122,726
Gross charge-offs	—		—		—		—		—		170		—		170
Multifamily and Commercial Mortgage
Pass	33,500		755,904		1,091,283		643,742		547,393		836,844		—		3,908,666
Special Mention	—		1,282		—		—		1,131		3,738		—		6,151
Substandard	—		14,057		7,250		11,649		33,953		19,330		—		86,239
Doubtful	—		—		—		—		—		—		—		—
Total	33,500		771,243		1,098,533		655,391		582,477		859,912		—		4,001,056
Gross charge-offs	—		—		—		—		139		—		—		139
Commercial Real Estate
Pass	1,599,913		1,450,248		1,593,594		227,171		7,741		53,000		818,968		5,750,635
Special Mention	—		—		16,035		—		—		—		—		16,035
Substandard	—		18,657		41,422		40,900		15,000		30,339		—		146,318
Doubtful	—		—		—		—		—		—		—		—
Total	1,599,913		1,468,905		1,651,051		268,071		22,741		83,339		818,968		5,912,988
Gross charge-offs	—		—		—		—		—		—		—		—
Commercial & Industrial - Non-RE
Pass	953,015		473,483		281,867		44,634		5,719		13,025		2,874,179		4,645,922
Special Mention	—		1,763		8,624		1,682		10,116		—		33,509		55,694
Substandard	—		29,471		76,719		1,032		—		2,989		15,704		125,915
Doubtful	—		—		—		—		—		—		—		—
Total	953,015		504,717		367,210		47,348		15,835		16,014		2,923,392		4,827,531
Gross charge-offs	—		—		—		—		—		86		—		86
Auto & Consumer
Pass	44,290		124,923		196,464		49,125		15,769		16,812		—		447,383
Special Mention	9		323		585		118		10		25		—		1,070
Substandard	143		521		1,031		303		216		98		—		2,312
Doubtful	—		—		—		—		—		—		—		—
Total	44,442		125,767		198,080		49,546		15,995		16,935		—		450,765
Gross charge-offs	50		2,664		3,969		1,294		168		233		—		8,378
Other
Pass	21		—		—		985		—		890		—		1,896
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	21		—		—		985		—		890		—		1,896
Gross charge-offs	—		—		—		—		—		—		—		—






Total
Pass	3,005,016		3,434,231		4,430,576		1,463,515		877,922		1,680,382		3,852,256		18,743,898
Special Mention	31,009		3,368		25,244		1,800		20,272		24,469		33,509		139,671
Substandard	143		62,990		133,745		53,884		63,514		103,413		15,704		433,393
Doubtful	—		—		—		—		—		—		—		—
Total	$	3,036,168	$	3,500,589	$	4,589,565	$	1,519,199	$	961,708	$	1,808,264	$	3,901,469	$	19,316,962
As a % of total gross loans	15.72 %		18.12 %		23.76 %		7.86 %		4.98 %		9.36 %		20.20 %		100.0 %
Total gross charge-offs	$	50	$	2,664	$	3,969	$	1,294	$	307	$	489	$	—	$	8,773

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	June 30, 2023
	Loans Held for Investment by Fiscal Year of Origination												Revolving Loans		Total
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior
Single Family-Mortgage & Warehouse
Pass	$	730,498	$	1,346,804	$	522,873	$	324,458	$	255,547	$	639,401	$	243,175	$	4,062,756
Special Mention	—		7,280		7,026		8,303		12,942		18,244		6,614		60,409
Substandard	—		5,188		4,686		14,384		2,024		24,386		—		50,668
Doubtful	—		—		—		—		—		—		—		—
Total	730,498		1,359,272		534,585		347,145		270,513		682,031		249,789		4,173,833
Multifamily and Commercial Mortgage
Pass	558,787		975,186		498,744		314,383		224,592		404,222		—		2,975,914
Special Mention	—		9,691		4,636		1,360		7,705		—		—		23,392
Substandard	—		3,145		5,686		38,857		6,181		29,050		—		82,919
Doubtful	—		—		—		—		—		—		—		—
Total	558,787		988,022		509,066		354,600		238,478		433,272		—		3,082,225
Commercial Real Estate
Pass	1,867,476		2,323,095		631,500		87,059		117,928		—		960,024		5,987,082
Special Mention	29,000		43,427		—		8,457		800		15,062		—		96,746
Substandard	—		29,200		37,951		18,500		15,487		14,852		—		115,990
Doubtful	—		—		—		—		—		—		—		—
Total	1,896,476		2,395,722		669,451		114,016		134,215		29,914		960,024		6,199,818
Commercial & Industrial - Non-RE
Pass	488,120		358,214		29,777		14,794		2,098		—		1,707,619		2,600,622
Special Mention	—		8,221		—		11,413		—		—		600		20,234
Substandard	—		17,762		1,032		—		—		—		—		18,794
Doubtful	—		—		—		—		—		—		—		—
Total	488,120		384,197		30,809		26,207		2,098		—		1,708,219		2,639,650
Auto & Consumer
Pass	161,831		256,154		70,223		24,906		19,897		9,929		—		542,940
Special Mention	423		632		453		60		14		6		—		1,588
Substandard	350		785		233		133		162		73		—		1,736
Doubtful	—		—		—		—		—		—		—		—
Total	162,604		257,571		70,909		25,099		20,073		10,008		—		546,264
Other
Pass	5,721		—		1,306		—		—		1,164		—		8,191
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		2,000		45		—		—		—		—		2,045
Doubtful	—		—		—		—		—		—		—		—
Total	5,721		2,000		1,351		—		—		1,164		—		10,236
Total
Pass	3,812,433		5,259,453		1,754,423		765,600		620,062		1,054,716		2,910,818		16,177,505
Special Mention	29,423		69,251		12,115		29,593		21,461		33,312		7,214		202,369
Substandard	350		58,080		49,633		71,874		23,854		68,361		—		272,152
Doubtful	—		—		—		—		—		—		—		—
Total	$	3,842,206	$	5,386,784	$	1,816,171	$	867,067	$	665,377	$	1,156,389	$	2,918,032	$	16,652,026
As a % of total gross loans	23.07 %		32.35 %		10.91 %		5.21 %		4.00 %		6.94 %		17.52 %		100.0 %

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The following tables provide the aging of loans by portfolio segment:


	March 31, 2024
(Dollars in thousands)	Current			30-59 Days			60-89 Days			90+ Days			Total
Single Family-Mortgage & Warehouse	$	4,000,039		$	56,839		$	2,287		$	63,561		$	4,122,726
Multifamily and Commercial Mortgage	3,943,570			12,566			10,337			34,583			4,001,056
Commercial Real Estate	5,825,204			6,500			20,932			60,352			5,912,988
Commercial & Industrial - Non-RE	4,826,499			—			—			1,032			4,827,531
Auto & Consumer	444,680			3,731			1,161			1,193			450,765
Other	1,896			—			—			—			1,896

Total	$	19,041,888		$	79,636		$	34,717		$	160,721		$	19,316,962
As a % of total gross loans	98.58		%	0.41		%	0.18		%	0.83		%	100.00		%


	June 30, 2023
(Dollars in thousands)	Current			30-59 Days			60-89 Days			90+ Days			Total
Single Family-Mortgage & Warehouse	$	4,102,150		$	20,832		$	7,971		$	42,880		$	4,173,833
Multifamily and Commercial Mortgage	3,048,217			2,705			1,124			30,179			3,082,225
Commercial Real Estate	6,173,716			11,250			—			14,852			6,199,818
Commercial & Industrial - Non-RE	2,639,650			—			—			—			2,639,650
Auto & Consumer	537,181			6,529			1,707			847			546,264
Other	8,024			68			1			2,143			10,236
Total	$	16,508,938		$	41,384		$	10,803		$	90,901		$	16,652,026
As a % of total gross loans	99.14		%	0.25		%	0.06		%	0.55		%	100.00		%

Loans reaching 90 or more days past due are generally placed on nonaccrual. As of March 31, 2024 and June 30, 2023, there were loans of $ 49.3 million and $ 14.1 million, respectively, over 90 days past due and still accruing interest as the Company expects to collect the principal and interest amounts due.

Single family mortgage loans in process of foreclosure were $ 29.3 million and $ 17.7 million as of March 31, 2024 and June 30, 2023, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty. The Company may grant certain modifications of loans to borrowers experiencing financial difficulty, which effective July 1, 2023, are reported as financial difficulty modifications (“FDMs”). The Company’s modification programs provide various modifications to borrowers experiencing financial difficulty which may include interest rate reductions, term extensions, payment delays and/or principal forgiveness. FDMs during the three and nine months ended March 31, 2024 were not significant.

Prior to adoption of ASU 2022-02, the Company accounted for certain modifications as troubled debt restructurings (“TDRs”). Approximately 1.77 % of our nonaccrual loans were considered TDRs at June 30, 2023. Borrowers that made timely payments after TDRs were considered non-performing for at least six months . Generally, after six months of timely payments, those TDRs were reclassified from the nonaccrual loan category to the performing loan category and any previously deferred interest income was recognized. The Company had no TDRs classified as performing loans at June 30, 2023.

6. DERIVATIVES

For additional information on the Company’s derivative instruments, see Note 1 — “Organizations and Summary of Significant Accounting Policies,” Note 2 — “Acquisitions” and Note 3 — “Fair Value” in the 2023 Form 10-K and Note 3 — “Fair Value” herein . As of March 31, 2024 and June 30, 2023, there were no derivatives designated in hedge accounting relationships.

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The following table presents the fair values and notional amounts of the Company’s derivative instruments. While the notional amounts give an indication of the volume of the Company’s derivatives activity, the notional amounts significantly exceed, in the Company’s view, the possible losses that could arise from such transactions. For most derivative contracts, the notional amount is not exchanged, rather it is a reference amount used to calculate payments.



(Dollars in thousands)	As of March 31, 2024		As of June 30, 2023
Other Assets — Interest Rate Derivative Assets 1 — Fair Value	$	106,392	$	919
Accounts Payable and Other Liabilities — Interest Rate Derivative Liabilities 1 — Fair Value	102,635		691
Interest Rate Derivative Assets — Notional	$	1,205,097	$	231,709
Interest Rate Derivative Liabilities — Notional	1,184,103		204,522

1 Derivative assets and liabilities are not subject to any counterparty netting and are presented gross in the condensed consolidated balance sheets. As of March 31, 2024, the Company posted cash collateral of $ 26.3 million and received cash collateral of $ 17.5 million, reflected in Cash, cash equivalents and restricted cash and Deposits, respectively, on its Condensed consolidated balance sheets.

The following table presents the gains (losses) related to the Company’s derivative instrument activity recognized in the Condensed Consolidated Statements of Income:


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
(Dollars in thousands)	2024		2023		2024		2023
Banking and service fees	$	27	$	574	$	417	$	693
Mortgage banking and servicing rights income	98		125		606		410

7. STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

The Company has an equity incentive plan, the Amended and Restated 2014 Stock Incentive Plan (the “2014 Plan”), which provides for 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 2014 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 common stock. On November 9, 2023, the Company’s stockholders approved the 2014 Plan, which authorized one million additional shares for future awards under the 2014 Plan. The Company also has an employment agreement with its Chief Executive Officer that provides for 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” in the 2023 Form 10-K.

At March 31, 2024, 1,637,528 shares of common stock were authorized for future awards under the 2014 Plan. As of March 31, 2024, the total compensation cost not yet recognized related to non-vested awards was $ 62.1 million and the weighted-average period over which it is expected to be recognized is 1.3 years.

The following table presents the status and changes in RSUs:


	RSUs	Weighted-Average Grant-Date Fair Value
Non-vested balance at June 30, 2023	1,407,882	$	41.53
Granted	958,682	44.90
Vested	( 568,077 )	39.71
Forfeited	( 50,379 )	40.43
Non-vested balance at March 31, 2024	1,748,108	$	44.00

The total fair value of shares vested for the three and nine months ended March 31, 2024 was $ 10.3 million and $ 25.2 million, respectively. The total fair value of shares vested for the three and nine months ended March 31, 2023 was $ 7.6 million and $ 19.7 million, respectively.

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Common Stock Repurchases .

The following table presents common stock repurchases:


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
(Dollars in thousands except per share data)	2024		2023		2024		2023
Total repurchase	$	595	$	31,605	$	83,781	$	31,605
Number of shares repurchased	12,101		849,081		2,267,610		849,081
Average price paid per share	$	49.22	$	37.22	$	36.95	$	37.22

On February 12, 2024, the Company announced its Board of Directors’ authorization of a program to repurchase up to $ 100 million of its common stock. The new share repurchase authorization is in addition to the existing share repurchase plan announced on April 27, 2023, which had approximately $ 19.8 million remaining as of March 31, 2024. The share repurchase program will continue in effect until terminated by the Board of Directors of the Company. For additional information regarding the Company’s share repurchase program see Note 15 — “Stockholders’ Equity” in the 2023 Form 10-K.

8. EARNINGS PER COMMON SHARE

The following table presents the calculation of basic and diluted earnings per common share (“EPS”):


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
(Dollars in thousands, except per share data)	2024		2023		2024		2023
Earnings Per Common Share
Net income	$	110,720	$	79,850	$	345,136	$	219,809
Average common shares issued and outstanding	56,932,050		59,930,634		57,699,236		59,928,263
Earnings per common share	$	1.94	$	1.33	$	5.98	$	3.67
Diluted Earnings Per Common Share
Net income	$	110,720	$	79,850	$	345,136	$	219,809
Average common shares issued and outstanding	56,932,050		59,930,634		57,699,236		59,928,263
Dilutive effect of average unvested RSUs	1,105,648		696,766		1,008,579		667,151
Average dilutive common shares outstanding	58,037,698		60,627,400		58,707,815		60,595,414
Diluted earnings per common share	$	1.91	$	1.32	$	5.88	$	3.63
Weighted average antidilutive common stock equivalents (excluded from the computation of EPS)	723		2,776		24,524		33,297

For further information regarding the Company’s EPS calculation see Note 17 — “Earnings per Common Share” in the 2023 Form 10-K.

9. COMMITMENTS AND CONTINGENCIES

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:


(Dollars in thousands)	As of March 31, 2024
Within one year	$	12,633
After one year and within two years	12,589
After two years and within three years	12,534
After three years and within four years	11,884
After four years within five years	10,510
After five years	14,751
Total lease payments	74,901
Less: amount representing interest	( 6,779 )
Total lease liability	$	68,122

Credit-Related Financial Instruments . In the normal course of business, the Company makes commitments to extend credit to meet the financing needs of its customers and 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

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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 31, 2024, the Company had unfunded commitments to originate $ 95.1 million in fixed rate loans and $ 3,581.4 million in variable rate loans, totaling an aggregate outstanding principal balance of $ 3,676.5 million. For March 31, 2024, the Company’s fixed rate commitments to originate had a weighted-average rate of 8.71 %. At March 31, 2024, the Company also had fixed rate commitments to sell loans with an aggregate outstanding principal balance of $ 34.7 million. At March 31, 2024, 54 % of the commitments to originate loans are matched with commitments to sell related to conforming single family loans classified as held for sale, respectively. The Company also has standby letters of credit commitments of $ 15.9 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.

In the normal course of business, Axos Clearing LLC’s (“Axos Clearing”) 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. A consolidated derivative action, In re BofI Holding, Inc., Case No. 15cv2722 GPC (KSC), is pending before the United States District Court for the Southern District of California (the “Derivative Action”). The complaint in the Derivative Action sets forth allegations made in a related employment action, Erhart v. BofI Holding Inc., No. 15cv2287 BAS (NLS) (S.D. Cal.) (the “Employment Action”) brought by a former employee of the Company and was stayed pending resolution of the Employment Action. On October 4, 2023, the court hearing the Employment Action entered a final amended judgment awarding damages and attorneys’ fees to the plaintiff. The defendants have filed a Notice of Appeal from the Employment Action judgment and all orders merged therein. On January 2, 2024, the Derivative Action plaintiff filed a Third Amended Complaint. On March 5, 2024, the court stayed the case until resolution of the appeal in the Employment Action. The Derivative Action defendants dispute, and intend to vigorously defend against, the allegations raised in the Third Amended Complaint. The Derivative Action plaintiff seeks damages on behalf of the Company with respect to the Employment Action, and also seeks damages on behalf of the Company in connection with a now settled securities class action that was also based upon allegations made in the Employment Action and settled within available insurance coverage without attribution of wrongdoing to the Company, its management, or its directors.

In view of the inherent difficulty of predicting the outcome of the Derivative Action it is not possible to reasonably predict or estimate the eventual loss or range of loss, if any, related to the Derivative Action.

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 MUFG Union Bank, N.A. Judgment on such verdict was initially entered on June 5, 2023, and a corrected judgment was entered on June 20, 2023. The Company filed a Notice of Appeal to the Supreme Court of the State of New York Appellate Division (the “Appellate Division”) on July 6, 2023, and the plaintiff filed a Notice of Cross-Appeal on July 20, 2023. The Appellate Division held oral arguments on the appeal and cross-appeal on March 5, 2024. On March 26, 2024, the Appellate Division entered an order vacating the finding of liability and award of $ 2.5 million in damages for plaintiff’s breach of contract claim as well as the associated prejudgment interest. In addition, the Appellate Division rejected plaintiff’s cross appeal. The Company now intends to file an appeal with the New York Court of Appeals regarding the question of whether a terminable-at-will contract can support a claim for tortious interference. The Company recorded a $ 16 million accrued expense in “Accounts payable and other liabilities” on the condensed consolidated balance sheet and in “General and administrative expense” on the condensed consolidated statement of income as of and for the year ended June 30, 2023, respectively. Given the uncertainty of the appellate process and other factors that are unknown or currently unquantifiable, the Company maintained its accrual at March 31, 2024.

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10. SEGMENT REPORTING AND REVENUE INFORMATION

Segment Reporting. The operating segments reported below are the 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 deciding how to allocate resources and in assessing performance. The operating segments and segment results of the Company are determined based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments.

The Company evaluates performance and allocates resources based on pre-tax profit or loss from operations. Certain corporate administration costs have not been allocated to the reportable segments. 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 Company itself for their operating cash held on deposit with the Business Banking segment. For more information on the Company’s operating segments, see Note 23 — “Segment Reporting” in the Company’s 2023 Form 10-K.

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


	For the Three Months Ended March 31, 2024
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	258,435	$	7,133	$	( 3,962 )	$	261,606
Provision for credit losses	6,000		—		—		6,000
Non-interest income	11,908		32,746		( 11,491 )		33,163
Non-interest expense	104,959		32,488		( 4,219 )		133,228
Income before taxes	$	159,384	$	7,391	$	( 11,234 )	$	155,541

	For the Three Months Ended March 31, 2023
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	196,249	$	6,335	$	( 3,602 )	$	198,982
Provision for credit losses	5,500		—		—		5,500
Non-interest income	10,685		38,298		( 16,737 )		32,246
Non-interest expense	98,252		25,138		( 12,346 )		111,044
Income before taxes	$	103,182	$	19,495	$	( 7,993 )	$	114,684

	For the Nine Months Ended March 31, 2024
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	694,289	$	18,755	$	( 11,677 )	$	701,367
Provision for credit losses	26,500		—		—		26,500
Non-interest income	128,244		99,942		( 36,387 )		191,799
Non-interest expense	308,027		87,979		( 20,433 )		375,573
Income before taxes	$	488,006	$	30,718	$	( 27,631 )	$	491,093

	For the Nine Months Ended March 31, 2023
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	574,524	$	15,486	$	( 10,643 )	$	579,367
Provision for credit losses	17,251		—		—		17,251
Non-interest income	31,954		103,467		( 47,638 )		87,783
Non-interest expense	295,831		74,924		( 35,597 )		335,158
Income before taxes	$	293,396	$	44,029	$	( 22,684 )	$	314,741

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	As of March 31, 2024
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Goodwill	$	35,721	$	61,952	$	—	$	97,673
Total Assets	$	21,794,503	$	816,409	$	31,221	$	22,642,133

	As of June 30, 2023
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Goodwill	$	35,721	$	61,952	$	—	$	97,673
Total Assets	$	19,396,167	$	899,496	$	52,806	$	20,348,469

Revenue Information. The following presents non-interest income, segregated by revenue streams in-scope and out-of-scope of Accounting Standards Codification (“ASC”) 606 for the periods indicated. For further information of the Company’s recognition of revenue and ASC 606 see Note 1 — “Organizations and Summary of Significant Accounting Policies” in the 2023 Form 10-K.


	For the Three Months Ended				For the Nine Months Ended
	March 31,				March 31,
(Dollars in thousands)	2024		2023		2024		2023
Advisory fee income	$	8,105	$	6,879	$	23,686	$	20,821
Broker-dealer clearing fees	4,885		6,228		16,488		15,886
Deposit service fees	525		623		3,619		3,931
Card fees	495		737		1,909		3,670
Bankruptcy trustee and fiduciary service fees	1,418		1,566		4,209		4,506
Non-interest income (in-scope of ASC 606)	15,428		16,033		49,911		48,814
Non-interest income (out-of-scope of ASC 606)	17,735		16,213		141,888		38,969
Total non-interest income	$	33,163	$	32,246	$	191,799	$	87,783

11. BORROWINGS, SUBORDINATED NOTES AND DEBENTURES

Subordinated Notes. On March 6, 2024, the Company paid $ 4.2 million to repurchase $ 5.0 million par value of its 4.00 % Fixed-to-Floating Rate Subordinated Notes due March 1, 2032 resulting in a pre-tax non-cash gain on extinguishment of $ 0.7 million, after accounting for unamortized issuance costs and accrued interest. The non-cash gain is recorded in “General and administrative expense” in the Condensed Consolidated Statements of Income for the three and nine months ended March 31, 2024.

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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 2023 Form 10-K, 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 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 Company’s financial prospects and other projections of our performance and asset quality, our deposit balances and capital ratios, our ability to continue to grow profitably and increase our business, our ability to continue to diversify lending and deposit franchises, 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. Actual results and the timing of events could differ materially from those expressed or implied in such forward-looking statements as a result of risks and uncertainties, including without limitation our ability to successfully integrate acquisitions and realize the anticipated benefits of the transactions, changes in the interest rate environment, monetary policy, inflation, government regulation, general economic conditions, changes in the competitive marketplace, conditions in the real estate markets in which we operate, risks associated with credit quality, our ability to attract and retain deposits and access other sources of liquidity, and the outcome and effects of litigation and other factors beyond our reasonable control. These and other risks and uncertainties are discussed under the heading “Item 1A. Risk Factors” herein and in our 2023 Form 10-K, which has been filed with the SEC, could cause actual results to differ materially from those expressed or implied in any forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. All forward-looking statements are qualified in their entirety by this cautionary statement, and 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 is a diversified financial services company with approximately $22.6 billion in assets and approximately $35.0 billion of assets under custody and/or administration at Axos Clearing LLC (“Axos Clearing”). Axos Bank (the “Bank”) provides consumer and commercial banking products through its digital online and mobile banking platforms, low-cost distribution channels and affinity partners. Our Bank offers deposit and lending products to customers nationwide including consumer and business checking, savings and time deposit accounts and single family and multifamily residential mortgages, commercial real estate mortgages and loans, fund and lender finance loans, asset-based loans, auto loans and other consumer loans. Our Bank generates non-interest income from consumer and business products, including fees from loans originated for sale, deposit account service fees, prepayment fees, as well as technology and payment transaction processing fees. We offer securities products and services to independent registered investment advisors (“RIAs”) and introducing broker dealers (“IBDs”) through Axos Clearing and Axos Advisor Services (“AAS”) and direct-to-consumer securities trading and digital investment management products through Axos Invest, Inc. (“Axos Invest”). AAS and Axos Clearing generate interest and fee income by providing comprehensive securities custody services to RIAs and clearing, stock lending and margin lending services to IBDs, respectively. Axos Invest generates fee income from self-directed securities trading and margin lending and fee income from digital wealth management services to consumers. Axos Invest LLC is an introducing broker-dealer which supports direct trading. Our common stock is listed on the New York Stock Exchange under the ticker symbol “AX” and is a component of the Russell 2000® Index, the KBW Nasdaq Financial Technology Index, the S&P SmallCap 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

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

FDIC Loan Purchase

On December 7, 2023, the Company acquired from the FDIC two loan portfolios with an aggregate unpaid principal balance of $1.3 billion at a 37% discount to par. Given the level of discount at which the loans were purchased, the yield over the remaining life of the loans is expected to exceed that of the Company’s existing loan portfolio prior to the FDIC Loan Purchase. For additional information on the FDIC Loan Purchase, see Note 2 – “ Acquisitions. ”

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 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, low-cost distribution channels to serve the needs of consumers and small businesses nationally. In addition, the Banking Business focuses on providing deposit products nationwide to industry verticals (e.g., Title and Escrow), treasury management products to a variety of businesses, and commercial & industrial and commercial real estate lending to clients. The Banking Business 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.

Securities Business. The Securities Business segment includes the clearing broker-dealer, registered investment advisor custody business, and 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 Securities Business also offers specialized accounting software that serves the business management, family office and wealth management industries.

Critical Accounting 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 GAAP. 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 our estimates and assumptions are reasonable under the circumstances. However, actual results may differ significantly from these estimates and assumptions and could have a material effect on the carrying value of assets and liabilities, our results of operations and/or our cash flows.

Critical accounting estimates are those we consider most important to the portrayal of our financial condition and results of operations because they require our most difficult judgments, often as a result of the need to make estimates that are inherently uncertain. Our critical accounting estimates are described in detail in the 2023 Form 10-K in Note 1 — “Organizations and Summary of Significant Accounting Policies” and Item 7 — “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Critical Accounting Estimates.”

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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 (“Adjusted EPS”), 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. 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 items, (including amortization of intangible assets related to acquisitions) and other costs (unusual or non-recurring charges). 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 costs, and other costs provides investors with an alternative understanding of our core business.

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


	Three Months Ended March 31,				Nine Months Ended March 31,
(Dollars in thousands, except per share amounts)	2024		2023		2024		2023
Net income	$	110,720	$	79,850	$	345,136	$	219,809
FDIC Loan Purchase - Gain on purchase	—		—		(92,397)		—
FDIC Loan Purchase - Provision for credit losses	—		—		4,648		—
Acquisition-related costs	2,719		2,846		8,289		8,169
Other costs 1	—		—		—		16,000
Income tax effect	(784)		(864)		23,616		(7,290)
Adjusted earnings (Non-GAAP)	$	112,655	$	81,832	$	289,292	$	236,688

Average dilutive common shares outstanding	58,037,698		60,627,400		58,707,815		60,595,414

Diluted EPS	$	1.91	$	1.32	$	5.88	$	3.63
FDIC Loan Purchase - Gain on purchase	—		—		(1.57)		—
FDIC Loan Purchase - Provision for credit losses	—		—		0.08		—
Acquisition-related costs	0.05		0.04		0.14		0.13
Other costs 1	—		—		—		0.26
Income tax effect	(0.02)		(0.01)		0.40		(0.11)
Adjusted EPS (Non-GAAP)	$	1.94	$	1.35	$	4.93	$	3.91
1 Other costs for the nine months ended March 31, 2023 reflect an accrual recorded in the first quarter of fiscal year 2023 as a result of an adverse legal judgement that has not been finalized.

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 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):


	March 31,
(Dollars in thousands, except per share amounts)	2024		2023
Common stockholders’ equity	$	2,196,293	$	1,844,104
Less: servicing rights, carried at fair value	28,130		25,396
Less: goodwill and intangible assets—net	144,324		154,928
Tangible common stockholders’ equity (Non-GAAP)	$	2,023,839	$	1,663,780

Common shares outstanding at end of period	57,079,429		59,355,124

Book value per common share	38.48		31.07
Less: servicing rights, carried at fair value per common share	0.49		0.43
Less: goodwill and other intangible assets—net per common share	2.53		2.61
Tangible book value per common share (Non-GAAP)	$	35.46	$	28.03

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SELECTED FINANCIAL INFORMATION

AXOS FINANCIAL, INC.

SELECTED CONSOLIDATED FINANCIAL INFORMATION


(Dollars in thousands)	March 31, 2024			June 30, 2023			March 31, 2023
Selected Balance Sheet Data:
Total assets	$	22,642,133		$	20,348,469		$	19,782,481
Loans—net of allowance for credit losses	18,733,455			16,456,728			15,836,255
Loans held for sale, carried at fair value	16,239			23,203			7,920
Loans held for sale, lower of cost or fair value	—			776			303
Allowance for credit losses	257,522			166,680			161,293
Trading securities	592			758			400
Available-for-sale securities	207,582			232,350			279,612

Securities borrowed	105,853			134,339			87,293
Customer, broker-dealer and clearing receivables	292,630			374,074			323,359
Total deposits	19,103,532			17,123,108			16,738,869

Advances from the Federal Home Loan Bank	90,000			90,000			90,000
Borrowings, subordinated debentures and debentures	330,389			361,779			334,330
Securities loaned	119,800			159,832			114,613
Customer, broker-dealer and clearing payables	387,176			445,477			406,092
Total stockholders’ equity	2,196,293			1,917,159			1,844,104

Capital Ratios:
Equity to assets at end of period	9.70		%	9.42		%	9.32		%
Axos Financial, Inc.:
Tier 1 leverage (to adjusted average assets)	9.33		%	8.96		%	9.29		%
Common equity tier 1 capital (to risk-weighted assets)	11.47		%	10.94		%	10.71		%
Tier 1 capital (to risk-weighted assets)	11.47		%	10.94		%	10.71		%
Total capital (to risk-weighted assets)	14.26		%	13.82		%	13.63		%
Axos Bank:
Tier 1 leverage (to adjusted average assets)	9.86		%	9.68		%	10.17		%
Common equity tier 1 capital (to risk-weighted assets)	12.47		%	11.63		%	11.55		%
Tier 1 capital (to risk-weighted assets)	12.47		%	11.63		%	11.55		%
Total capital (to risk-weighted assets)	13.49		%	12.50		%	12.40		%
Axos Clearing LLC:
Net capital	102,963			$	35,221		$	79,459
Excess capital	97,646			$	29,905		$	74,377
Net capital as a percentage of aggregate debit items	38.73		%	13.25		%	31.27		%
Net capital in excess of 5% aggregate debit items	$	89,671		$	21,930		$	66,755

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AXOS FINANCIAL, INC.

SELECTED CONSOLIDATED FINANCIAL INFORMATION


	At or for the Three Months Ended						At or for the Nine Months Ended
	March 31,						March 31,
(Dollars in thousands, except per share data)	2024			2023			2024			2023
Selected Income Statement Data:
Interest and dividend income	$	443,564		$	307,334		$	1,202,179		$	810,708
Interest expense	181,958			108,352			500,812			231,341
Net interest income	261,606			198,982			701,367			579,367
Provision for credit losses	6,000			5,500			26,500			17,251
Net interest income, after provision for credit losses	255,606			193,482			674,867			562,116
Non-interest income	33,163			32,246			191,799			87,783
Non-interest expense	133,228			111,044			375,573			335,158
Income before income taxes	155,541			114,684			491,093			314,741
Income taxes	44,821			34,834			145,957			94,932
Net income	$	110,720		$	79,850		$	345,136		$	219,809

Per Common Share Data:
Net income:
Basic	$	1.94		$	1.33		$	5.98		$	3.67
Diluted	$	1.91		$	1.32		$	5.88		$	3.63
Adjusted earnings per common share (Non-GAAP) 1	$	1.94		$	1.35		$	4.93		$	3.91
Book value per common share	$	38.48		$	31.07		$	38.48		$	31.07
Tangible book value per common share (Non-GAAP) 1	$	35.46		$	28.03		$	35.46		$	28.03

Weighted average number of common shares outstanding:
Basic	56,932,050			59,930,634			57,699,236			59,928,263
Diluted	58,037,698			60,627,400			58,707,815			60,595,414
Common shares outstanding at end of period	57,079,429			59,355,124			57,079,429			59,355,124
Common shares issued at end of period	70,033,523			69,340,533			70,033,523			69,340,533

Performance Ratios and Other Data:
Loan originations for investment	$	2,801,110		$	1,735,651		$	8,145,703		$	6,235,451
Loan originations for sale	$	47,821		$	45,200		$	144,731		$	158,500
Loan purchases	$	—		$	787		$	841,408		$	914
Return on average assets	1.98		%	1.71		%	2.18		%	1.60		%
Return on average common stockholders’ equity	20.71		%	17.42		%	22.65		%	16.73		%
Interest rate spread 2	3.88		%	3.46		%	3.62		%	3.57		%
Net interest margin 3	4.87		%	4.42		%	4.61		%	4.41		%
Net interest margin 3 – Banking Business Segment	4.92		%	4.50		%	4.68		%	4.56		%
Efficiency ratio 4	45.20		%	48.02		%	42.05		%	50.24		%
Efficiency ratio 4 – Banking Business Segment	38.82		%	47.48		%	37.45		%	48.78		%

Asset Quality Ratios:
Net annualized charge-offs to average loans	0.07		%	0.04		%	0.05		%	0.04		%
Non-performing loans and leases to total loans	0.63		%	0.60		%	0.63		%	0.60		%
Non-performing assets to total assets	0.55		%	0.51		%	0.55		%	0.51		%
Allowance for credit losses - loans to total loans held for investment 5	1.36		%	1.01		%	1.36		%	1.01		%
Allowance for credit losses - loans to non-performing loans 5	210.95		%	168.12		%	210.95		%	168.12		%

1 See “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.

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

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

5 The increase in the ratios of the allowance for credit losses - loans to total loans held for investment and the allowance for credit losses - loans to non-performing loans at March 31, 2024 was primarily attributable to the allowance for credit losses related to the PCD loans acquired in the FDIC Loan Purchase. See Note 2 - “Acquisitions” for additional information.

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RESULTS OF OPERATIONS

Comparison of the Three and Nine Months Ended March 31, 2024 and 2023

For the three months ended March 31, 2024, we had net income of $110.7 million, or $1.91 per diluted share, compared to net income of $79.9 million, or $1.32 per diluted share, for the three months ended March 31, 2023. For the nine months ended March 31, 2024, we had net income of $345.1 million, or $5.88 per diluted share, compared to net income of $219.8 million, or $3.63 per diluted share, for the nine months ended March 31, 2023.

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 Three Months Ended,
	March 31, 2024						March 31, 2023
(Dollars in thousands)	Average Balance 1		Interest Income/ Expense		Average Yields Earned/Rates Paid 2		Average Balance 1		Interest Income/ Expense		Average Yields Earned/Rates Paid 2
Assets:
Loans 3, 4	$	18,734,531	$	405,280	8.65	%	$	15,842,029	$	279,864	7.07	%
Non-purchased loans	17,755,545		363,558		8.19	%	15,842,029		279,864		7.07	%
Purchased loans 5	978,986		41,722		17.05	%	—		—		—	%
Interest-earning deposits in other financial institutions	2,199,373		29,493		5.36	%	1,551,428		18,014		4.64	%
Mortgage-backed and other securities 4	220,176		2,695		4.90	%	263,914		3,978		6.03	%
Securities borrowed and margin lending 6	318,723		5,701		7.15	%	335,125		5,137		6.13	%
Stock of the regulatory agencies	17,250		395		9.16	%	19,457		341		7.01	%
Total interest-earning assets	21,490,053		443,564		8.26	%	18,011,953		307,334		6.83	%
Non-interest-earning assets	855,263						642,308
Total assets	$	22,345,316					$	18,654,261
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	14,954,432	$	165,283	4.42	%	$	10,707,667	$	89,772	3.35	%
Time deposits	1,102,472		11,454		4.16	%	1,181,342		8,667		2.93	%
Securities loaned	121,920		376		1.23	%	198,814		1,307		2.63	%
Advances from the FHLB	105,243		735		2.79	%	429,689		4,454		4.15	%
Borrowings, subordinated notes and debentures	335,840		4,110		4.90	%	338,175		4,152		4.91	%
Total interest-bearing liabilities	16,619,907		181,958		4.38	%	12,855,687		108,352		3.37	%
Non-interest-bearing demand deposits	2,753,093						3,312,618
Other non-interest-bearing liabilities	834,075						652,524
Stockholders’ equity	2,138,241						1,833,432
Total liabilities and stockholders’ equity	$	22,345,316					$	18,654,261
Net interest income			$	261,606					$	198,982
Interest rate spread 7					3.88	%					3.46	%
Net interest margin 8					4.87	%					4.42	%

1 Average balances are obtained from daily data.

2 Annualized.

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

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

5 Purchased loans include loans, loan discounts and unearned fees related to the FDIC Loan Purchase.

6 Margin lending is the significant component of the asset titled customer, broker-dealer and clearing receivables on the unaudited Condensed Consolidated Balance Sheets.

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

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

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	For the Nine Months Ended,
	March 31, 2024						March 31, 2023
(Dollars in thousands)	Average Balance 1		Interest Income/ Expense		Average Yields Earned/Rates Paid 2		Average Balance 1		Interest Income/ Expense		Average Yields Earned/Rates Paid 2
Assets:
Loans 3, 4	$	17,624,685	$	1,090,106	8.25	%	$	15,348,412	$	743,863	6.46	%
Non-purchased loans	17,214,338		1,036,437		8.03	%	15,348,412		743,863		6.46	%
Purchased loans 5	410,347		53,669		17.44	%	—		—		—	%
Interest-earning deposits in other financial institutions	2,105,053		85,740		5.43	%	1,483,191		40,975		3.68	%
Mortgage-backed and other securities 4	230,250		9,031		5.23	%	261,282		10,854		5.54	%
Securities borrowed and margin lending 6	329,015		16,163		6.55	%	399,246		13,842		4.62	%
Stock of the regulatory agencies	17,250		1,139		8.80	%	22,161		1,174		7.06	%
Total interest-earning assets	20,306,253		1,202,179		7.89	%	17,514,292		810,708		6.17	%
Non-interest-earning assets	834,111						799,594
Total assets	$	21,140,364					$	18,313,886
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	13,907,471	$	449,748	4.31	%	$	9,466,664	$	182,509	2.57	%
Time deposits	1,092,719		33,280		4.06	%	1,161,502		19,783		2.27	%
Securities loaned	164,258		1,835		1.49	%	343,561		3,317		1.29	%
Advances from the FHLB	95,048		1,794		2.52	%	534,411		12,121		3.02	%
Borrowings, subordinated notes and debentures	368,661		14,155		5.12	%	364,521		13,611		4.98	%
Total interest-bearing liabilities	15,628,157		500,812		4.27	%	11,870,659		231,341		2.60	%
Non-interest-bearing demand deposits	2,735,604						3,916,959
Other non-interest-bearing liabilities	745,680						773,961
Stockholders’ equity	2,030,923						1,752,307
Total liabilities and stockholders’ equity	$	21,140,364					$	18,313,886
Net interest income			$	701,367					$	579,367
Interest rate spread 7					3.62	%					3.57	%
Net interest margin 8					4.61	%					4.41	%

1. Average balances are obtained from daily data.

2. Annualized.

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

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

5. Purchased loans include loans, loan discounts and unearned fees related to the FDIC Loan Purchase.

6. Margin lending is the significant component of the asset titled customer, broker-dealer and clearing receivables on the unaudited Condensed Consolidated Balance Sheets.

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

8. Net 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. 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 each based on the relative changes attributable to volume and changes attributable to rate.


	For the Three Months Ended						For the Nine Months Ended
	March 31,						March 31,
	2024 vs 2023						2024 vs 2023
	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	$	56,393	$	69,023	$	125,416	$	120,711	$	225,532	$	346,243
Non-purchased loans	14,671		69,023		83,694		67,042		225,532		292,574
Purchased loans 1	41,722		—		41,722		53,669		—		53,669
Interest-earning deposits in other financial institutions	8,368		3,111		11,479		20,974		23,791		44,765
Mortgage-backed and other securities	(602)		(681)		(1,283)		(1,239)		(584)		(1,823)
Securities borrowed and margin lending	(260)		824		564		(2,737)		5,058		2,321
Stock of the regulatory agencies	(42)		96		54		(290)		255		(35)
Total increase (decrease) in interest income	$	63,857	$	72,373	$	136,230	$	137,419	$	254,052	$	391,471
Increase (decrease) in interest expense:
Interest-bearing demand and savings	$	41,826	$	33,685	$	75,511	$	109,377	$	157,862	$	267,239
Time deposits	(615)		3,402		2,787		(1,236)		14,733		13,497
Securities loaned	(391)		(540)		(931)		(1,937)		455		(1,482)
Advances from the FHLB	(2,593)		(1,126)		(3,719)		(8,596)		(1,731)		(10,327)
Borrowings, subordinated notes and debentures	(33)		(9)		(42)		157		387		544
Total increase (decrease) in interest expense	$	38,194	$	35,412	$	73,606	$	97,765	$	171,706	$	269,471

1 Purchased loans include loans, loan discounts and unearned fees related to the FDIC Loan Purchase.

Net Interest Income

For the three months ended March 31, 2024, net interest income totaled $261.6 million, an increase of $62.6 million, or 31.5%, compared to net interest income of $199.0 million for the three months ended March 31, 2023. For the three months ended March 31, 2024, net interest margin increased by 45 basis points compared to the net interest margin of 4.42% for the three months ended March 31, 2023.

For the three months ended March 31, 2024, total interest and dividend income increased 44.3% from the three months ended March 31, 2023, primarily due to a $125.4 million increase in interest income from loans, attributable to a 158 basis point increase in rates earned and a $2.9 billion increase in average balances.

For the three months ended March 31, 2024, total interest expense increased 67.9% from the three months ended March 31, 2023, primarily due to a $75.5 million increase in interest expense from demand and savings deposits, attributable to a 107 basis point increase in rates paid and a $4.2 billion increase in average balances.

For the nine months ended March 31, 2024, net interest income totaled $701.4 million, an increase of $122.0 million and 21.1% compared to net interest income of $579.4 million for the nine months ended March 31, 2023. For the nine months ended March 31, 2024 net interest margin increased by 20 basis points compared to the net interest margin of 4.41% for the nine months ended March 31, 2023.

For the nine months ended March 31, 2024, total interest and dividend income increased 48.3% from the nine months ended March 31, 2023, primarily due to a $346.2 million increase in interest income from loans, attributable to a 179 basis point increase in rates earned and a $2.3 billion increase in average balances.

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For the nine months ended March 31, 2024, total interest expense increased 116.5% from the nine months ended March 31, 2023, primarily due to a $267.2 million increase in interest expense from demand and savings deposits, attributable to a 174 basis point increase in rates paid and a $4.4 billion increase in average balances.

Provision for Credit Losses

The provision for credit losses was $6.0 million and $26.5 million for the three and nine months ended March 31, 2024, respectively, compared to $5.5 million and $17.3 million for the three and nine months ended March 31, 2023, respectively. The provision for credit losses consists of provisions for both funded loans and for unfunded lending commitments. The provision for credit losses for funded loans was $9.0 million and $27.3 million for the three and nine months ended March 31, 2024, respectively. The provision for credit losses for the three months ended March 31, 2024 was primarily due to loan growth in the Commercial & Industrial - Non-RE portfolio and an increase in the Commercial Real Estate portfolio reflecting changes in the underlying macroeconomic variables. For the nine months ended March 31, 2024, the increase in the provision for credit losses was primarily due to loan growth in the Commercial & Industrial - Non-RE portfolio and the loans acquired in the FDIC Loan Purchase. The provision for credit losses for unfunded commitments benefit of $3.0 million and $0.8 million for the three and nine months ended March 31, 2024, respectively, was primarily driven by a change in the underlying mix of Commercial & Industrial - Non-RE unfunded commitments. Provisions for credit losses are charged to income to bring the allowance for credit losses for loans and unfunded lending commitments to a level deemed appropriate by management based on the factors discussed under the heading “Financial Condition—Asset Quality and Allowance for Credit Losses - Loans.”

Non-Interest Income

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


	For the Three Months Ended						For the Nine Months Ended
	March 31,						March 31,
(Dollars in thousands)	2024		2023		Inc (Dec)		2024		2023		Inc (Dec)
Broker-dealer fee income	$	12,087	$	13,745	$	(1,658)	$	37,083	$	32,735	$	4,348
Advisory fee income	8,105		6,879		1,226		23,686		20,821		2,865
Banking and service fees	8,876		8,443		433		27,287		25,100		2,187
Mortgage banking and servicing rights income	2,180		1,107		1,073		6,811		5,113		1,698
Prepayment penalty fee income	1,915		2,072		(157)		4,535		4,014		521
Gain on acquisition	—		—		—		92,397		—		92,397
Total non-interest income	$	33,163	$	32,246	$	917	$	191,799	$	87,783	$	104,016

For the three and nine months ended March 31, 2024, non-interest income increased by $0.9 million or 2.8% and $104.0 million, or 118.49%, respectively.

For the three months ended March 31, 2024, increased advisory fee income, primarily attributable to higher mutual fund fee income, and increased mortgage banking and servicing rights income, primarily due to higher gains on loan sales, were partially offset by a decrease in broker-dealer fee income primarily attributable to lower cash sorting balances at non-affiliated banks.

For the nine months ended March 31, 2024, the increase in non-interest income is primarily attributable to a $92.4 million gain on the FDIC Loan Purchase completed in the three months ended December 31, 2023, an increase in broker-dealer fee income due to higher rates earned on cash sorting balances at non-affiliated banks and an increase in advisory fee income attributable to higher mutual fund fee income.

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Non-Interest Expense

The following table sets forth information regarding our non-interest expense:


	For the Three Months Ended						For the Nine Months Ended
	March 31,						March 31,
(Dollars in thousands)	2024		2023		Inc (Dec)		2024		2023		Inc (Dec)
Salaries and related costs	$	67,419	$	53,046	$	14,373	$	182,113	$	149,762	$	32,351
Data and operational processing	18,243		15,808		2,435		52,653		44,462		8,191
Depreciation and amortization	7,221		5,671		1,550		19,587		17,722		1,865
Advertising and promotional	10,282		11,786		(1,504)		30,451		29,055		1,396
Professional services	9,073		6,747		2,326		24,860		23,289		1,571
Occupancy and equipment	4,254		3,873		381		12,101		11,610		491
FDIC and regulatory fees	5,232		3,859		1,373		13,616		11,163		2,453
Broker-dealer clearing charges	4,459		3,356		1,103		14,419		9,924		4,495
General and administrative expense	7,045		6,898		147		25,773		38,171		(12,398)
Total non-interest expense	$	133,228	$	111,044	$	22,184	$	375,573	$	335,158	$	40,415

For the three months ended March 31, 2024, non-interest expense increased $22.2 million, or 20.0%, primarily due to increases of:

• $14.4 million in salaries and related costs primarily due to increased headcount and salaries;

• $2.4 million in data and operational processing expense primarily due to enhancements of core processing systems, customer interfaces and clearing and custody technology programs; and

• $2.3 million in professional services primarily due to increased legal and consulting services.

The increases were partially offset by a $1.5 million decrease in advertising and promotional expense primarily due to reduced deposit marketing expenses.

For the nine months ended March 31, 2024, non-interest expense increased $40.4 million, or 12.1%, primarily due to increases of:

• $32.4 million in salaries and related costs primarily due to increased headcount and salaries;

• $8.2 million in data and operational processing expense primarily due to enhancements of core processing systems, customer interfaces and clearing and custody technology programs; and

• $4.5 million in broker-dealer clearing charges primarily due to higher mutual fund clearing fees and corporate actions.

The increases were partially offset by $12.4 million decrease in general and administrative expenses, primarily reflecting the absence of a $16.0 million accrual in the prior year first quarter for an adverse legal judgment that has not been finalized.

Provision for Income Taxes

Income tax expense was $44.8 million and $146.0 million for the three and nine months ended March 31, 2024, respectively, compared to $34.8 million and $94.9 million for three and nine months ended March 31, 2023, respectively. Our effective income tax rates for the three months ended March 31, 2024 and 2023 were 28.82% and 30.37%, respectively. Our effective income tax rates for the nine months ended March 31, 2024 and 2023 were 29.72% and 30.16%, respectively.

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SEGMENT RESULTS

Our Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to our Company’s financial condition and operating results and management’s regular review of the operating results of those services. Our Company operates through two operating segments: Banking Business and Securities Business. In order to reconcile the two segments to the consolidated totals, our Company includes parent-only activities and intercompany eliminations. 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 our Company and to our Company itself for their operating cash held on deposit with the Banking Business segment.

The following tables present the operating results of the segments:


	For the Three Months Ended March 31, 2024
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	258,435	$	7,133	$	(3,962)	$	261,606
Provision for credit losses	6,000		—		—		6,000
Non-interest income	11,908		32,746		(11,491)		33,163
Non-interest expense	104,959		32,488		(4,219)		133,228
Income before income taxes	$	159,384	$	7,391	$	(11,234)	$	155,541

	For the Three Months Ended March 31, 2023
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	196,249	$	6,335	$	(3,602)	$	198,982
Provision for credit losses	5,500		—		—		5,500
Non-interest income	10,685		38,298		(16,737)		32,246
Non-interest expense	98,252		25,138		(12,346)		111,044
Income before income taxes	$	103,182	$	19,495	$	(7,993)	$	114,684

	For the Nine Months Ended March 31, 2024
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	694,289	$	18,755	$	(11,677)	$	701,367
Provision for credit losses	26,500		—		—		26,500
Non-interest income	128,244		99,942		(36,387)		191,799
Non-interest expense	308,027		87,979		(20,433)		375,573
Income before income taxes	$	488,006	$	30,718	$	(27,631)	$	491,093

	For the Nine Months Ended March 31, 2023
(Dollars in thousands)	Banking Business		Securities Business		Corporate/Eliminations		Axos Consolidated
Net interest income	$	574,524	$	15,486	$	(10,643)	$	579,367
Provision for credit losses	17,251		—		—		17,251
Non-interest income	31,954		103,467		(47,638)		87,783
Non-interest expense	295,831		74,924		(35,597)		335,158
Income before income taxes	$	293,396	$	44,029	$	(22,684)	$	314,741

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Banking Business

For the three months ended March 31, 2024, our Banking Business segment had income before income taxes of $159.4 million, compared to income before taxes of $103.2 million for the three months ended March 31, 2023. For the nine months ended March 31, 2024, our Banking Business segment had income before income taxes of $488.0 million, compared to income before taxes of $293.4 million for the nine months ended March 31, 2023.

For the three and nine months ended March 31, 2024, the Banking Business segment’s net interest income increased $62.2 million or 31.7%, and $119.8 million or 20.8%, respectively, compared to net interest income for the three and nine months ended March 31, 2023, respectively. The increase in net interest income was primarily due to higher interest income from loans, primarily attributable to higher rates earned and average balances, partially offset by higher rates paid and higher average interest-bearing deposit balances.

For the three and nine months ended March 31, 2024, the Banking Business segment’s non-interest income increased $1.2 million, or 11.4%, and $96.3 million, or 301.3%, respectively, compared to non-interest income for the three and nine months ended March 31, 2023, respectively. The increase in non-interest income for the three months ended March 31, 2024 was primarily due to higher mortgage banking and servicing rights income and higher banking and service fees. For the nine months ended March 31, 2024, higher non-interest income was primarily driven by the $92.4 million gain on the FDIC Loan Purchase in the three months ended December 31, 2023.

For the three and nine months ended March 31, 2024, the Banking Business segment’s non-interest expense increased $6.7 million, or 6.8%, and $12.2 million, or 4.1%, respectively, compared to non-interest expense for the three and nine months ended March 31, 2023. The increase in non-interest expense for the three months ended March 31, 2024 was primarily due higher salaries and related costs, higher data and operational processing expenses and increased professional services expense, partially offset by lower advertising and promotional expense. For the nine months ended March 31, 2024, the increase in non-interest expense was primarily due to higher salaries and related costs, higher data and operational processing expenses and increased FDIC fees, partially offset by the absence of a $16.0 million accrual in the prior year period for an adverse legal judgment that has not been finalized and lower advertising and promotional expense.

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

The following tables 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 Three Months Ended
	March 31,
	2024						2023
(Dollars in thousands)	Average Balance 1		Interest Income/ Expense		Average Yields Earned/Rates Paid 2		Average Balance 1		Interest Income/ Expense		Average Yields Earned/Rates Paid 2
Assets:
Loans 3, 4	$	18,734,531	$	405,337	8.65	%	$	15,819,777	$	279,583	7.07	%
Non-purchased loans	17,755,545		363,615		8.19	%	15,819,777		279,583		7.07	%
Purchased loans 5	978,986		41,722		17.05	%	—		—		—	%
Interest-earning deposits in other financial institutions	2,053,499		27,490		5.35	%	1,315,843		15,257		4.64	%
Mortgage-backed and other securities 4	219,611		2,695		4.91	%	271,084		4,013		5.92	%
Stock of the regulatory agencies	17,250		395		9.16	%	19,457		338		6.95	%
Total interest-earning assets	21,024,891		435,917		8.29	%	17,426,161		299,191		6.87	%
Non-interest-earning assets	499,203						356,996
Total assets	$	21,524,094					$	17,783,157
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	14,973,985	$	165,293	4.42	%	$	10,806,346	$	89,822	3.32	%
Time deposits	1,102,472		11,454		4.16	%	1,181,342		8,667		2.93	%
Advances from the FHLB	105,243		735		2.79	%	429,689		4,454		4.15	%
Borrowings, subordinated notes and debentures	—		—		—	%	57		—		—	%
Total interest-bearing liabilities	16,181,700		177,482		4.39	%	12,417,434		102,943		3.32	%
Non-interest-bearing demand deposits	2,839,344						3,380,441
Other non-interest-bearing liabilities	324,120						182,502
Stockholders’ equity	2,178,930						1,802,780
Total liabilities and stockholders’ equity	$	21,524,094					$	17,783,157
Net interest income			$	258,435					$	196,248
Interest rate spread 6					3.90	%					3.55	%
Net interest margin 7					4.92	%					4.50	%

1 Average balances are obtained from daily data.

2 Annualized.

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

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

5 Purchased loans include loans, loan discounts and unearned fees related to the FDIC Loan Purchase.

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

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

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	For the Nine Months Ended
	March 31,
	2024						2023
(Dollars in thousands)	Average Balance 1		Interest Income/ Expense		Average Yields Earned/Rates Paid 2		Average Balance 1		Interest Income/ Expense		Average Yields Earned/Rates Paid 2
Assets:
Loans 3, 4	$	17,624,685	$	1,090,106	8.25	%	$	15,324,641	$	742,902	6.46	%
Non-purchased loans	17,214,338		1,036,437		8.03	%	15,324,641		742,902		6.46	%
Purchased loans 5	410,347		53,669		17.44	%	—		—		—	%
Interest-earning deposits in other financial institutions	1,928,794		78,894		5.45	%	1,201,771		34,014		3.77	%
Mortgage-backed and other securities 6	229,672		9,031		5.24	%	270,573		10,999		5.42	%
Stock of the regulatory agencies	17,250		1,139		8.80	%	22,161		1,167		7.02	%
Total interest-earning assets	19,800,401		1,179,170		7.94	%	16,819,146		789,082		6.26	%
Non-interest-earning assets	451,053						336,842
Total assets	$	20,251,454					$	17,155,988
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	13,946,716	$	449,807	4.30	%	$	9,544,778	$	182,654	2.55	%
Time deposits	1,092,719		33,280		4.06	%	1,161,502		19,783		2.27	%
Advances from the FHLB	95,048		1,794		2.52	%	534,411		12,121		3.02	%
Borrowings, subordinated notes and debentures	18		—		—	%	37		—		—	%
Total interest-bearing liabilities	15,134,501		484,881		4.27	%	11,240,728		214,558		2.55	%
Non-interest-bearing demand deposits	2,814,951						3,992,906
Other non-interest-bearing liabilities	273,215						187,976
Stockholders’ equity	2,028,787						1,734,378
Total liabilities and stockholders’ equity	$	20,251,454					$	17,155,988
Net interest income			$	694,289					$	574,524
Interest rate spread 6					3.67	%					3.71	%
Net interest margin 7					4.68	%					4.56	%

1 Average balances are obtained from daily data.

2 Annualized.

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

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

5 Purchased loans include loans, loan discounts and unearned fees related to the FDIC Loan Purchase.

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

7 Net 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 Banking Business segment’s 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 each based on the relative changes attributable to volume and changes attributable to rate.


	For the Three Months Ended						For the Nine Months Ended
	March 31,						March 31,
	2024 vs 2023						2024 vs 2023
	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	$	56,827	$	68,927	$	125,754	$	121,989	$	225,215	$	347,204
Non-purchased loans	15,105		68,927		84,032		68,320		225,215		293,535
Purchased loans 1	41,722		—		41,722		53,669		—		53,669
Interest-earning deposits	9,585		2,648		12,233		25,005		19,875		44,880
Securities	(695)		(623)		(1,318)		(1,449)		(519)		(1,968)
Stock of the regulatory agencies	(42)		99		57		(290)		262		(28)
Total increase (decrease) in interest income	$	65,675	$	71,051	$	136,726	$	145,255	$	244,833	$	390,088
Increase / (decrease) in interest expense:
Interest-bearing demand and savings	$	40,609	$	34,862	$	75,471	$	108,617	$	158,536	$	267,153
Time deposits	(615)		3,402		2,787		(1,236)		14,733		13,497
Advances from the FHLB	(2,593)		(1,126)		(3,719)		(8,596)		(1,731)		(10,327)
Total increase (decrease) in interest expense	$	37,401	$	37,138	$	74,539	$	98,785	$	171,538	$	270,323

1 Purchased loans include loans, loan discounts and unearned fees related to the FDIC Loan Purchase.

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


	For the Three Months Ended March 31,				For the Nine Months Ended March 31,
	2024		2023		2024		2023
Efficiency ratio	38.82	%	47.48	%	37.45	%	48.78	%
Return on average assets	2.25	%	1.61	%	2.24	%	1.59	%
Interest rate spread	3.90	%	3.55	%	3.67	%	3.71	%
Net interest margin	4.92	%	4.50	%	4.68	%	4.56	%

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 Company and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities in our Securities Business, including items related to securities financing operations.

Securities Business

For the three and nine months ended March 31, 2024, our Securities Business segment had income before income taxes of $7.4 million and $30.7 million, respectively, compared to income before income taxes of $19.5 million and $44.0 million for the three and nine months ended March 31, 2023, respectively.

For the three and nine months ended March 31, 2024, net interest income increased $0.8 million or 12.6%, and $3.3 million or 21.1%, respectively, compared to net interest income for the three and nine months ended March 31, 2023. The increase was primarily driven by a decrease in average securities loaned balances and higher rates earned on margin loans.

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For the three months ended March 31, 2024, non-interest income decreased $5.6 million, or 14.5%, compared to non-interest income for the three months ended March 31, 2023. For the nine months ended March 31, 2024, non-interest income decreased $3.5 million, or 3.4%, compared to non-interest income for the nine months ended March 31, 2023. The decreases were primarily driven by lower broker-dealer fee income, partially offset by higher advisory fee income.

For the three and nine months ended March 31, 2024, non-interest expense increased $7.4 million, or 29.2%, and $13.1 million or 17.4%, respectively, compared to non-interest expense for the three and nine months ended March 31, 2023. The increases were primarily driven by higher salaries and related costs, higher broker-dealer clearing charges and higher data and operational processing expenses.

The following table provides selected information for Axos Clearing:


(Dollars in thousands)	March 31, 2024		June 30, 2023

FDIC insured deposit program balances at banks	$	1,294,258	$	1,627,053
Margin balances	$	210,883	$	205,880
Cash reserves for the benefit of customers	$	145,888	$	149,059





Securities lending:
Interest-earning assets – securities borrowed	$	105,853	$	134,339
Interest-bearing liabilities – securities loaned	$	119,800	$	159,832

FINANCIAL CONDITION

Balance Sheet Analysis

Our total assets increased $2.3 billion, or 11.3%, to $22.6 billion at March 31, 2024, from $20.3 billion at June 30, 2023, primarily attributable to an increase in loans. Our total liabilities increased $2.0 billion, or 10.9%, to $20.4 billion at March 31, 2024 from $18.4 billion at June 30, 2023, primarily attributable to an increase in deposits.

Loans

The following table sets forth the composition of the loan portfolio:


	March 31, 2024				June 30, 2023
(Dollars in thousands)	Amount		Percent		Amount		Percent
Single Family - Mortgage & Warehouse	$	4,122,726	21.3	%	$	4,173,833	25.1	%
Multifamily and Commercial Mortgage 1	4,001,056		20.7	%	3,082,225		18.5	%
Commercial Real Estate 1	5,912,988		30.6	%	6,199,818		37.2	%
Commercial & Industrial - Non-RE	4,827,531		25.0	%	2,639,650		15.8	%
Auto & Consumer	450,765		2.3	%	546,264		3.3	%
Other	1,896		0.1	%	10,236		0.1	%

Total gross loans	19,316,962		100.0	%	16,652,026		100.0	%
Allowance for credit losses - loans	(257,522)				(166,680)
Unaccreted discounts and loan fees	(325,985)				(28,618)
Total net loans	$	18,733,455			$	16,456,728

1 Includes PCD loans of $285.4 million in Multifamily and Commercial Mortgage and $44.5 million in Commercial Real Estate as of March 31, 2024. For further detail on PCD loans refer to Note 1—“Summary of Significant Accounting Policies”.

The increase in Multifamily and Commercial Mortgage loans and the related impact on the allowance for credit losses and unaccreted discounts and loan fees, was primarily driven by the FDIC Loan Purchase. For further information on the FDIC Loan Purchase, refer to Note 2 — “Acquisitions.” The increase in Commercial & Industrial - Non-RE loans reflects the Company’s focus on expanding the sales and operational support teams to drive growth in this sector.

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Asset Quality and Allowance for Credit Losses - Loans

Non-performing Assets

Non-performing loans are comprised of those 90 days or more past due and other nonaccrual loans. Loans not yet reaching 90 days past due may be placed on nonaccrual status based on management’s assessment of the aging of contractual principal amounts due, among other factors. For an aging analysis of the Company’s loans held for investment as of March 31, 2024 and June 30, 2023, see Note 5—“Loans and Allowance for Credit Losses” in the Condensed Consolidated Financial Statements. Non-performing assets include non-performing loans plus, other real estate owned and repossessed vehicles.

Non-performing assets consisted of the following:


(Dollars in thousands)	March 31, 2024			June 30, 2023			Inc (Dec)
Non-performing assets:
Nonaccrual loans:
Single Family - Mortgage & Warehouse	$	51,342		$	30,714		$	20,628
Multifamily and Commercial Mortgage	38,465			35,103			3,362
Commercial Real Estate	26,102			14,852			11,250
Commercial & Industrial - Non-RE	4,020			2,989			1,031
Auto & Consumer	2,151			1,457			694
Other	—			2,045			(2,045)

Total non-performing loans	$	122,080		$	87,160		$	34,920
Foreclosed real estate	1,765			6,966			(5,201)
Repossessed vehicles—Autos	1,102			1,133			(31)
Total non-performing assets	$	124,947		$	95,259		$	29,688
Total non-performing loans as a percentage of total loans	0.63		%	0.52		%	0.11		%
Total non-performing assets as a percentage of total assets	0.55		%	0.47		%	0.08		%

Total non-performing assets increased to $124.9 million at March 31, 2024 from $95.3 million at June 30, 2023, primarily attributable to increases in single-family mortgage and commercial real estate non-performing loans.

Management establishes an allowance for credit losses based upon its evaluation of the expected lifetime credit losses related to the amortized cost basis of loans on the balance sheet. The net charge-off rate for the three months ended March 31, 2024 was 0.07%, compared to 0.04% for the March 31, 2023. Of the 0.07% of net charge-offs for the three months ended March 31, 2024, 0.04% was related to Auto loans covered by insurance policies. 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 nine months ended March 31, 2024, see “Results of Operations —Provision for Credit Losses.” We believe that the lower average LTV in the loan portfolio will continue to result in future lower average mortgage loan charge-offs when compared to many other comparable banks. The resolution of existing other real estate owned and non-performing loans should not have a significant adverse impact on our operating results.

Available-for-Sale Securities

Total available-for-sale securities were $207.6 million as of March 31, 2024, compared with $232.4 million at June 30, 2023. During the nine months ended March 31, 2024, we purchased $9.6 million of securities and received proceeds from sales and principal repayments of approximately $39.4 million. The remainder of the change for the available-for-sale portfolio is attributable to changes in the fair value of the securities.

Deposits

Deposits increased by $2.0 billion, or 11.6%, to $19.1 billion at March 31, 2024, from $17.1 billion at June 30, 2023. Interest-bearing demand and savings increased $2.4 billion and time deposits decreased $0.3 billion. Non-interest bearing deposits decreased by $0.1 billion as of March 31, 2024, compared with June 30, 2023.

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The following table sets forth the composition of the deposit portfolio:


	March 31, 2024				June 30, 2023
(Dollars in thousands)	Amount		Rate 1		Amount		Rate 1
Non-interest bearing	$	2,758,596	—	%	$	2,898,150	—	%
Interest-bearing:
Demand	3,024,608		2.80	%	3,334,615		2.43	%
Savings	12,279,071		4.52	%	9,575,781		4.20	%
Total interest-bearing demand and savings	15,303,679		4.18	%	12,910,396		3.74	%
Time deposits:
$250 and under 2	668,527		4.58	%	932,436		3.72	%
Greater than $250	372,730		4.79	%	382,126		4.36	%
Total time deposits	1,041,257		4.65	%	1,314,562		3.91	%
Total interest bearing 2	16,344,936		4.21	%	14,224,958		3.76	%
Total deposits	$	19,103,532	3.60	%	$	17,123,108	3.12	%

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

2 The total interest-bearing includes brokered deposits of $1,840.0 million and $2,028.5 million as of March 31, 2024 and June 30, 2023, respectively, of which $482.1 million and $690.9 million, respectively, are time deposits classified as $250,000 and under .

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


	March 31, 2024	June 30, 2023	March 31, 2023
Non-interest bearing	51,010	45,640	45,018
Interest-bearing checking and savings accounts	479,046	427,299	404,408
Time deposits	5,214	6,340	6,729
Total number of deposit accounts	535,270	479,279	456,155

Total Bank deposits that exceeded the FDIC insurance limit of $250,000 or were not collateralized at both March 31, 2024 and June 30, 2023 were $2.1 billion and $1.7 billion, respectively. The maturities of time deposits that exceeded the FDIC insurance limit were as follows:


(Dollars in thousands)	March 31, 2024
3 months or less	$	187,636
3 months to 6 months	136,798
6 months to 12 months	43,114
Over 12 months	5,182
Total	$	372,730

Borrowings

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


	March 31, 2024					June 30, 2023					March 31, 2023
(Dollars in thousands)	Balance			Weighted Average Rate		Balance			Weighted Average Rate		Balance			Weighted Average Rate

FHLB Advances	$	90,000		2.32	%	$	90,000		2.32	%	$	90,000		2.32	%
Borrowings, subordinated notes and debentures	330,389			4.56	%	361,779			4.69	%	334,330			4.59	%
Total borrowings	$	420,389		4.08	%	$	451,779		4.22	%	$	424,330		4.11	%

Weighted average cost of borrowings during the quarter	4.39		%			4.58		%			4.48		%
Borrowings as a percent of total assets	1.86		%			2.22		%			2.14		%

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 origination of loans and to provide us with interest rate risk protection should rates rise. On March 6, 2024, the Company repurchased $5.0 million par

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value of its 4.00% Fixed-to-Floating Rate Subordinated Notes due March 1, 2032. For further information refer to Note 11 — “Borrowings, Subordinated Notes and Debentures.”

Stockholders’ Equity

Stockholders’ equity increased $279.1 million to $2,196.3 million at March 31, 2024, compared to $1,917.2 million at June 30, 2023. The increase was primarily the result of net income for the nine months ended March 31, 2024 of $345.1 million partially offset by repurchases of $83.8 million of shares of the Company’s common stock.

During the nine months ended March 31, 2024, the Company repurchased a total of $83.8 million or 2,267,610 shares of common stock at an average price of $36.95 share. On February 12, 2024, the Company announced its Board of Directors’ authorization of a program to repurchase up to $100 million of its common stock. The new share repurchase authorization is in addition to the existing share repurchase plan announced on April 27, 2023, which had approximately $19.8 million remaining as of March 31, 2024. There were no purchases of treasury stock under the new repurchase authorization.

LIQUIDITY

Cash flow information is as follows:


	For the Nine Months Ended
	March 31,
(Dollars in thousands)	2024		2023
Operating Activities	$	261,710	$	119,247
Investing Activities	$	(2,155,335)	$	(1,807,976)
Financing Activities	$	1,857,450	$	2,618,254

During the nine months ended March 31, 2024, we had net cash inflows from operating activities of $261.7 million compared to inflows of $119.2 million for the nine months ended March 31, 2023. 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 $2,155.3 million for the nine months ended March 31, 2024, while outflows totaled $1,808.0 million for the nine months ended March 31, 2023. The increase in outflows was primarily due to increased originations and purchases of loans held for investment related to the FDIC Loan Purchase and acquisition of marine floor financing loans, partially offset by higher principal repayments on loans in the nine months ended March 31, 2023.

Net cash inflows from financing activities totaled $1,857.5 million for the nine months ended March 31, 2024, compared to net cash inflows from financing activities of $2,618.3 million for the nine months ended March 31, 2023. The primary driver behind the increase in net cash inflows was an increase in deposits in the nine months ended March 31, 2024.

As of March 31, 2024, the Bank could borrow up to 35% of its total assets from the FHLB. Borrowings are collateralized by pledging certain mortgage loans and available-for-sale securities to the FHLB. At March 31, 2024, the Company had $3,242.4 million available immediately and $3,629.1 million available with additional collateral and the Company had $5,226.4 million of loans and $152.0 thousand of securities pledged to the FHLB. We also had six unsecured federal funds purchase lines with six different banks totaling $275.0 million, under which no borrowings were outstanding at March 31, 2024.

The Bank has the ability to borrow short-term from the FRBSF Discount Window. At March 31, 2024, the Bank did not have any borrowings outstanding and the amount available from this source was $6,566.6 million. Borrowings are collateralized by pledging commercial loans and consumer loans. At March 31, 2024 we had $7,834.9 million of loans pledged to the FRBSF.

Axos Clearing has a $150 million secured line of credit available for borrowing, as needed. As of March 31, 2024, there was no amount outstanding on this credit facility. This credit facility bears interest at rates based on the Federal Funds rate and is due upon demand.

Axos Clearing also has $210 million of unsecured lines of credit available for limited purpose borrowing, which includes $100 million from Axos Financial, Inc. As of March 31, 2024, there was no amount outstanding on this credit facility. This credit facility bears interest at rates based on the Federal Funds rate and is due upon demand.

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We view our liquidity sources to be stable and adequate for our anticipated needs and contingencies for both the short- and long-term. Due to the diversified sources of our deposits, while maintaining approximately 90% of our total Bank deposits in insured or collateralized accounts as of March 31, 2024, we believe we have the ability to increase our level of deposits, and have available other potential sources of funding, to address our liquidity needs for the foreseeable future.

OFF-BALANCE SHEET COMMITMENTS

At March 31, 2024, we had commitments to fund loans of $3,676.5 million, and commitments to sell loans with an aggregate outstanding principal balance of $34.7 million. The Company also has standby letters of credit commitments of $15.9 million. We have no commitments to purchase available-for-sale securities as of March 31, 2024 .

In the normal course of business, Axos Clearing’s customer, broker-dealer, and registered investment advisor 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.

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 March 31, 2024, 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, 2024 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 March 31, 2024 and June 30, 2023 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. In fiscal year 2024, this cumulative amount is phased out of regulatory capital at 50% and the cumulative amount will be 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 thousands)	March 31, 2024			June 30, 2023			March 31, 2024			June 30, 2023
Regulatory Capital:
Tier 1	$	2,071,518		$	1,796,352		$	2,118,799		$	1,866,705
Common equity tier 1	$	2,071,518		$	1,796,352		$	2,118,799		$	1,866,705
Total capital	$	2,575,872		$	2,269,237		$	2,291,377		$	2,007,006

Assets:
Average adjusted	$	22,214,416		$	20,059,002		$	21,485,891		$	19,284,378
Total risk-weighted	$	18,065,883		$	16,414,213		$	16,991,929		$	16,054,633

Regulatory Capital Ratios:
Tier 1 leverage (to adjusted average assets)	9.33		%	8.96		%	9.86		%	9.68		%	5.00%	4.00%
Common equity tier 1 capital (to risk-weighted assets)	11.47		%	10.94		%	12.47		%	11.63		%	6.50%	4.50%
Tier 1 capital (to risk-weighted assets)	11.47		%	10.94		%	12.47		%	11.63		%	8.00%	6.00%
Total capital (to risk-weighted assets)	14.26		%	13.82		%	13.49		%	12.50		%	10.00%	8.00%

Basel III requires 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 March 31, 2024 and June 30, 2023, 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

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, 2024			June 30, 2023
Net capital	$	102,963		$	35,221
Excess Capital	$	97,646		$	29,905

Net capital as a percentage of aggregate debit items	38.73		%	13.25		%
Net capital in excess of 5% aggregate debit items	$	89,671		$	21,930

Axos Clearing, as a clearing broker, is subject to the SEC Customer Protection Rule (Rule 15c3-3 of the Exchange Act) which requires segregation of funds in a special reserve account for the exclusive benefit of customers (“Customer Reserve Bank Account”) and proprietary accounts of brokers (“PAB Reserve Account”). As of March 31, 2024, Axos Clearing was in compliance with its Customer Reserve Bank Account and PAB Reserve Account deposit requirements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

For further discussion of the Company’s market risk, see Item 7A— “Quantitative and Qualitative Disclosures About Market Risk” in the 2023 Form 10-K.

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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.

Absent any subsequent asset and liability actions by management, 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. Similarly, absent any subsequent asset and liability actions by management, 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

The following table sets forth the amounts of interest earning assets and interest bearing liabilities that were outstanding at March 31, 2024 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
	March 31, 2024
(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:
Cash and cash equivalents	$	2,101,696		$	—		$	—		$	—		$	2,101,696
Available-for-sale securities 1	174,563			3,368			13,029			16,622			207,582
Stock of the FHLB, at cost	17,250			—			—			—			17,250
Loans 2	13,141,500			1,418,050			3,868,364			305,441			18,733,355
Loans held for sale	16,239			—			—			—			16,239
Total interest-earning assets	15,451,248			1,421,418			3,881,393			322,063			21,076,122
Non-interest earning assets	—			—			—			—			718,381
Total assets	$	15,451,248		$	1,421,418		$	3,881,393		$	322,063		$	21,794,503
Interest-bearing liabilities:
Interest-bearing deposits 3	$	15,003,666		$	1,350,295		$	27,742		$	94		$	16,381,797

Advances from the FHLB	—			30,000			—			60,000			90,000

Total interest-bearing liabilities	15,003,666			1,380,295			27,742			60,094			16,471,797
Other non-interest-bearing liabilities	—			—			—			—			3,134,144
Stockholders’ equity	—			—			—			—			2,188,562
Total liabilities and equity	$	15,003,666		$	1,380,295		$	27,742		$	60,094		$	21,794,503
Net interest rate sensitivity gap	$	447,582		$	41,123		$	3,853,651		$	261,969		$	4,604,325
Cumulative gap	$	447,582		$	488,705		$	4,342,356		$	4,604,325		$	4,604,325
Net interest rate sensitivity gap—as a % of total interest earning assets	2.12		%	0.20		%	18.28		%	1.24		%	21.85		%
Cumulative gap—as % of total cumulative interest earning assets	2.12		%	2.32		%	20.60		%	21.85		%	21.85		%

1 Comprised primarily of non-agency and U.S. government agency mortgage-backed securities. The table reflects contractual repricing dates.

2 Loans includes loan premiums, discounts and unearned fees. The table reflects either contractual repricing dates or maturities.

3 The table assumes that the principal balances for demand deposits and savings accounts will reprice in the first year.

The above table provides an approximation of the projected re-pricing of assets and liabilities at March 31, 2024 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 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 historical 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 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.

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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, we assume no growth in the balance sheet other than for retained earnings:


	As of March 31, 2024
	First 12 Months				Next 12 Months
(Dollars in thousands)	Net Interest Income		Percentage Change from Base		Net Interest Income		Percentage Change from Base
Up 200 basis points	$	1,089,659	10.0	%	$	1,146,977	5.1	%
Base	$	990,859	—	%	$	1,090,865	—	%
Down 200 basis points	$	898,609	(9.3)	%	$	1,037,490	(4.9)	%

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 underlying interest rate curves.

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


	As of March 31, 2024
(Dollars in thousands)	Net Present Value		Percentage Change from Base		Net Present Value as a Percentage of Assets

Up 200 basis points	$	2,182,446	(1.3)	%	10.2	%
Up 100 basis points	$	2,203,747	(0.3)	%	10.2	%
Base	$	2,211,155	—	%	10.2	%
Down 100 basis points	$	2,204,549	(0.3)	%	10.1	%
Down 200 basis points	$	2,184,342	(1.2)	%	9.9	%

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. The relative levels of interest rates used in the scenarios are based on the forward yield curve as of the balance sheet date and assumptions for asset prepayment, deposit runoff and deposit repricing utilize such relative interest rates. In addition, deposit repricing and deposit runoff assumptions are generally based on historical behaviors over prior interest rate cycles. Results of these modeled outputs 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 changes 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, broker-dealer, and registered investment advisor 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.

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. 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.

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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 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 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 March 31, 2024 (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 is 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 9 — “ Commitments And Contingencies ” to the 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 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 Item 1A. “Risk Factors” in our 2023 Form 10-K. 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.

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 stock retained in connection with net settlement of restricted stock awards during the quarter ended March 31, 2024.


(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 Repurchases 1
Quarter Ended March 31, 2024
January 1, 2024 to January 31, 2024	—	$	—	—	$	20,358
February 1, 2024 to February 29, 2024	3,501	49.52		3,501	120,185
March 1, 2024 to March 31, 2024	8,600	49.10		8,600	119,762
For the Three Months Ended March 31, 2024	12,101	$	49.22	12,101	$	119,762

Stock Retained in Net Settlement 2
January 1, 2024 to January 31, 2024	114
February 1, 2024 to February 29, 2024	2,966
March 1, 2024 to March 31, 2024	81,289
For the Three Months Ended March 31, 2024	84,369

1 On April 27, 2023, the Company announced a program to repurchase up to $100 million of its common stock and on February 12, 2024, the Company announced a program to repurchase up to $100 million of its common stock. The February 12, 2024 share repurchase authorization is in addition to the existing share repurchase plan announced on April 27, 2023. Both of the share repurchase programs will continue in effect until terminated by the Board of Directors of the Company.

2 The Amended and Restated 2014 Stock Incentive Plan permits net settlement of stock issuances related to equity awards for purposes of payment of a grantee’s minimum income tax obligation. Stock Retained in Net Settlement was purchased at the vesting price of the associated 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 6. EXHIBITS


Exhibit Number	Description	Incorporated By Reference to






10.1	Form of Axos Financial, Inc. Amended and Restated 2014 Stock Incentive Plan Restricted Stock Award Unit Agreement	F iled here with.

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 30, 2024

By:

/s/ Gregory Garrabrants

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

Dated:

April 30, 2024

By:

/s/ Derrick K. Walsh

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

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Part I Financial Information Item 1. Financial Statements Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

10.1 Form of Axos Financial, Inc. Amended and Restated 2014 Stock Incentive Plan Restricted Stock Award Unit Agreement Filed herewith. 31.1 Chief Executive Officer Certification Pursuant to Section302 of the Sarbanes-Oxley Act of 2002 Filed herewith. 31.2 Chief Financial Officer Certification Pursuant to Section302 of the Sarbanes-Oxley Act of 2002 Filed herewith. 32.1 Chief Executive Officer Certification Pursuant to 18 U.S.C. Section1350, as Adopted Pursuant to Section906 of the Sarbanes-Oxley Act of 2002 Filed herewith. 32.2 Chief Financial Officer Certification Pursuant to 18 U.S.C. Section1350, as Adopted Pursuant to Section906 of the Sarbanes-Oxley Act of 2002 Filed herewith.

AX 10-Q Quarter ended March 31, 2024

Exhibits