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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 2021
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 001-37709
AX-20210930_G1.JPG
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
Securities registered pursuant to Section 12(g) of the Act:
None
__________________________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer   ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No
The number of shares outstanding of the registrant’s common stock on the last practicable date: 59,495,242 shares of common stock, $0.01 par value per share, as of October 20, 2021.

Table of Contents
AXOS FINANCIAL, INC.
INDEX
Page
1
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1
2
3
4
5
7
27
31
33
42
46
46
47
48
51
51
52
52
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Table of Contents
PART I – FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS
AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except par and stated value) September 30,
2021 		June 30,
2021
ASSETS
Cash and cash equivalents $ 1,000,076  $ 715,624 
Cash segregated for regulatory purposes 269,358  322,153 
Total cash, cash equivalents, and cash segregated 1,269,434  1,037,777 
Securities:
Trading 1,941  1,983 
Available-for-sale 135,996  187,335 
Stock of regulatory agencies 20,368  19,995 
Loans held for sale, carried at fair value 33,344  29,768 
Loans held for sale, lower of cost or fair value 11,949  12,294 
Loans—net of allowance for credit losses of $136.8 million as of September 30, 2021 and $133.0 million as of June 30, 2021
11,879,021  11,414,814 
Mortgage servicing rights, carried at fair value 18,438  17,911 
Other real estate owned and repossessed vehicles 6,320  6,782 
Goodwill and other intangible assets—net 164,944  115,972 
Securities borrowed 457,282  619,088 
Customer, broker-dealer and clearing receivables 427,169  369,815 
Other assets 480,544  432,031 
TOTAL ASSETS $ 14,906,750  $ 14,265,565 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing $ 3,632,521  $ 2,474,424 
Interest bearing 8,114,921  8,341,373 
Total deposits 11,747,442  10,815,797 
Advances from the Federal Home Loan Bank 157,500  353,500 
Borrowings, subordinated notes and debentures 255,896  221,358 
Securities loaned 539,505  728,988 
Customer, broker-dealer and clearing payables 510,040  535,425 
Accounts payable and accrued liabilities and other liabilities 237,746  209,561 
Total liabilities 13,448,129  12,864,629 
STOCKHOLDERS’ EQUITY:
Preferred stock—$0.01 par value; 1,000,000 shares authorized:
Common stock—$0.01 par value; 150,000,000 shares authorized; 68,370,617 shares issued and 59,494,633 shares outstanding as of September 30, 2021; 68,069,321 shares issued and 59,317,944 shares outstanding as of June 30, 2021
684  681 
Additional paid-in capital 436,528  432,550 
Accumulated other comprehensive income (loss)—net of tax 2,000  2,507 
Retained earnings 1,247,938  1,187,728 
Treasury stock, at cost; 8,875,984 shares as of September 30, 2021 and 8,751,377 shares as of June 30, 2021
(228,529) (222,530)
Total stockholders’ equity 1,458,621  1,400,936 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 14,906,750  $ 14,265,565 

See accompanying notes to the condensed consolidated financial statements.
1
Table of Contents
AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited) 
Three Months Ended
September 30,
(Dollars in thousands, except earnings per common share) 2021 2020
INTEREST AND DIVIDEND INCOME:
Loans, including fees $ 149,176  $ 141,424 
Securities borrowed and customer receivables 6,851  5,077 
Investments 2,283  3,388 
Total interest and dividend income 158,310  149,889 
INTEREST EXPENSE:
Deposits 7,712  19,554 
Advances from the Federal Home Loan Bank 1,016  1,372 
Securities loaned 251  124 
Other borrowings 2,689  1,512 
Total interest expense 11,668  22,562 
Net interest income 146,642  127,327 
Provision for credit losses 4,000  11,800 
Net interest income, after provision for credit losses 142,642  115,527 
NON-INTEREST INCOME:
Prepayment penalty fee income 2,986  1,368 
Gain on sale – other 17  334 
Mortgage banking income 5,253  19,567 
Broker-dealer fee income 11,766  5,702 
Banking and service fees 6,680  8,884 
Total non-interest income 26,702  35,855 
NON-INTEREST EXPENSE:
Salaries and related costs 40,737  38,623 
Data processing 12,092  7,928 
Depreciation and amortization 5,728  6,186 
Advertising and promotional 3,372  2,556 
Professional services 4,545  5,999 
Occupancy and equipment 3,181  3,011 
FDIC and regulatory fees 2,266  2,692 
Broker-dealer clearing charges 4,005  2,257 
General and administrative expense 8,505  6,294 
Total non-interest expense 84,431  75,546 
INCOME BEFORE INCOME TAXES 84,913  75,836 
INCOME TAXES 24,703  22,814 
NET INCOME $ 60,210  $ 53,022 
NET INCOME ATTRIBUTABLE TO COMMON STOCK $ 60,210  $ 52,945 
COMPREHENSIVE INCOME $ 59,703  $ 54,304 
Basic earnings per common share $ 1.01  $ 0.89 
Diluted earnings per common share $ 0.99  $ 0.88 
See accompanying notes to the condensed consolidated financial statements.
2
Table of Contents
AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
September 30,
(Dollars in thousands) 2021 2020
NET INCOME $ 60,210  $ 53,022 
Net unrealized gain (loss) from available-for-sale securities, net of tax expense (benefit) of $(214) and $503 for the three months ended September 30, 2021 and 2020, respectively.
(507) 1,282 
Other comprehensive income (loss) (507) 1,282 
Comprehensive income $ 59,703  $ 54,304 

See accompanying notes to the condensed consolidated financial statements.
3
Table of Contents
AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
For the Three Months Ended September 30, 2021
Preferred Stock Common Stock Additional Paid-in Capital Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss),
Net of Income Tax 		Treasury
Stock 		Total
Number of Shares
(Dollars in thousands) Shares Amount Issued Treasury Outstanding Amount
BALANCE—June 30, 2021 —  $ —  68,069,321  (8,751,377) 59,317,944  $ 681  $ 432,550  $ 1,187,728  $ 2,507  $ (222,530) $ 1,400,936 
Net income —  —  —  —  —  —  —  60,210  —  —  60,210 
Other comprehensive income (loss) —  —  —  —  —  —  —  —  (507) —  (507)
Stock-based compensation expense and restricted stock unit vesting —  —  301,296  (124,607) 176,689  3  3,978  —  —  (5,999) (2,018)
BALANCE—September 30, 2021 —  $ —  68,370,617  (8,875,984) 59,494,633  $ 684  $ 436,528  $ 1,247,938  $ 2,000  $ (228,529) $ 1,458,621 

For the Three Months Ended September 30, 2020
Preferred Stock Common Stock Additional Paid-in Capital Retained
Earnings 		Accumulated
Other
Comprehensive
Income (Loss),
Net of Income Tax 		Treasury
Stock 		Total
Number of Shares
(Dollars in thousands) Shares Amount Issued Treasury Outstanding Amount
BALANCE—June 30, 2020 515  $ 5,063  67,323,053  (7,710,418) 59,612,635  $ 673  $ 411,873  $ 1,009,299  $ (937) $ (195,125) $ 1,230,846 
Cumulative effect of change in accounting principle net of tax, ASU No. 2016-13
—  —  —  —  —  —  —  (37,088) —  —  (37,088)
Net income —  —  —  —  —  —  —  53,022  —  —  53,022 
Other comprehensive income (loss) —  —  —  —  —  —  —  —  1,282  —  1,282 
Cash dividends on preferred stock —  —  —  —  —  —  —  (77) —  —  (77)
Purchase of treasury stock —  —  —  (582,249) (582,249) —  —  —  —  (12,742) (12,742)
Stock-based compensation expense
 and restricted stock unit vesting 		—  —  299,882  (114,334) 185,548  3  4,412  —  —  (2,693) 1,722 
BALANCE—September 30, 2020 515  $ 5,063  67,622,935  (8,407,001) 59,215,934  $ 676  $ 416,285  $ 1,025,156  $ 345  $ (210,560) $ 1,236,965 
See accompanying notes to the condensed consolidated financial statements.
4
Table of Contents
AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Three Months Ended
September 30,
(Dollars in thousands) 2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 60,210  $ 53,022 
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion and amortization on securities, net (104) 49 
Net accretion of discounts on loans and leases (2,137) (1,492)
Amortization of borrowing costs 139  52 
Amortization of operating lease right of use asset 2,346  2,655 
Stock-based compensation expense 3,981  4,415 
Trading activity 42  (318)
Provision for credit losses 4,000  11,800 
Deferred income taxes 1,453  (4,264)
Origination of loans held for sale (209,967) (440,804)
Unrealized (gain) loss on loans held for sale (22) (1,303)
Gain on sales of loans held for sale (5,270) (19,901)
Proceeds from sale of loans held for sale 211,674  424,987 
Amortization and change in fair value of mortgage servicing rights 1,185  1,795 
(Gain) loss on sale of other real estate and foreclosed assets (33) (128)
Depreciation and amortization 5,728  6,186 
Net changes in assets and liabilities which provide (use) cash:
Securities borrowed 161,806  (41,102)
Customer, broker-dealer and clearing receivables (53,677) (62,859)
Other assets (118,876) 52,570 
Securities loaned (189,483) 60,031 
Customer, broker-dealer and clearing payables (25,385) 21,814 
Accounts payable and other liabilities 18,949  (914)
Net cash provided by operating activities (133,441) 66,291 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities (7,033) (22,071)
Proceeds from sales of securities 75,022  — 
Proceeds from repayment of securities 57,756  24,984 
Purchase of stock of regulatory agencies (8,219) — 
Proceeds from redemption of stock of regulatory agencies 8,219  — 
Origination of loans held for investment (2,050,587) (1,081,681)
Proceeds from sale of loans held for investment 12,100  9,220 
Mortgage warehouse loans activity, net (41,692) (249,131)
Proceeds from sales of other real estate owned and repossessed assets 621  487 
Acquisition of business activity, net of cash paid (54,597) — 
Purchases of loans and leases, net of discounts and premiums (7,481) — 
Principal repayments on loans 1,620,886  1,003,843 
Purchases of furniture, equipment, software and intangibles (3,943) (1,754)
Net cash used in investing activities (398,948) (316,103)
5
Table of Contents
AXOS FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
  Three Months Ended
September 30,
(Dollars in thousands) 2021 2020
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits 931,645  (781,036)
Payments of the Federal Home Loan Bank term advances (10,000) — 
Net (repayment) proceeds of Federal Home Loan Bank other advances (186,000) — 
Net proceeds (repayments) of other borrowings 34,400  45,600 
Tax payments related to settlement of restricted stock units (5,999) (2,693)
Repurchase of treasury stock —  (12,742)
Cash dividends paid on preferred stock —  (77)
Payment of debt issuance costs —  (2,598)
Proceeds from issuance of subordinated notes —  175,000 
Net cash provided by financing activities 764,046  (578,546)
NET CHANGE IN CASH AND CASH EQUIVALENTS 231,657  (828,358)
CASH AND CASH EQUIVALENTS—Beginning of year $ 1,037,777  $ 1,950,519 
CASH AND CASH EQUIVALENTS—End of period $ 1,269,434  $ 1,122,161 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on deposits and borrowed funds $ 14,989  $ 22,316 
Income taxes paid 29,955  16,318 
Transfers to other real estate and repossessed vehicles 140  350 
Transfers from loans held for investment to loans held for sale 12,100  2,189 
Transfers from loans held for sale to loans held for investment 376  27,379 
Operating lease liabilities for obtaining right of use assets 7,842  — 
Impact of adoption of ASU No. 2016-13 on retained earnings
—  37,088 
See accompanying notes to the condensed consolidated financial statements.
6
Table of Contents
AXOS FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2021 AND 2020
(Dollars in thousands, except per share and stated value amounts)
(Unaudited)

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The condensed consolidated financial statements include the accounts of Axos Financial, Inc. (“Axos”) and its wholly owned subsidiaries, Axos Bank (the “Bank”) and Axos Nevada Holding, LLC (the “Axos Nevada Holding”) and collectively, the “Company”. Axos Nevada Holding wholly owns the companies constituting the Securities Business segment. All significant intercompany balances and transactions have been eliminated in consolidation.
The accompanying interim condensed consolidated financial statements, presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), are unaudited and reflect all adjustments which, in the opinion of management, are necessary for a fair statement of financial condition and results of operations for the interim periods. All adjustments are of a normal and recurring nature. Results for the three months ended September 30, 2021 are not necessarily indicative of results that may be expected for any other interim period or for the year as a whole. Certain information and note disclosures normally included in the audited annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) with respect to interim financial reporting. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes for the year ended June 30, 2021 included in our Annual Report on Form 10-K.
Significant Accounting Policies
Our significant accounting policies are described in greater detail in Note 1 - “Summary of Significant Accounting Policies” contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2021.
New Accounting Standards
No new accounting standards have yet been adopted for the fiscal year beginning July 1, 2021.


7
2.     ACQUISITIONS
On August 2, 2021 the Company’s subsidiary, Axos Clearing, LLC, acquired certain assets and liabilities of E*TRADE Advisor Services (“EAS”), rebranded Axos Advisor Services (“AAS”), the registered investment advisor custody business of Morgan Stanley. AAS adds incremental fee income, a turnkey technology platform used by independent registered investment advisors for trading and custody services, and low cost deposits that can be used to generate fee income from other bank partners or to fund loan growth at Axos Bank. The initial purchase price of $54.6 million consists entirely of cash consideration paid upon acquisition and is pending final working capital adjustments.
The Company incurred acquisition-related costs totaling $0.04 million for the three months ended September 30, 2021. These costs are recognized in general and administrative expenses in the unaudited consolidated statements of income.
The acquisition is accounted for as a business combination under the acquisition method of accounting. Accordingly, tangible and intangible assets acquired (and liabilities assumed) are recorded at their estimated fair values as of the date of acquisition. The Company allocated the purchase price to the tangible and intangible assets acquired based on information available through September 30, 2021. The Company’s accounting for the acquisition has not been finalized as the Company continues to evaluate the working capital adjustment, which is expected to have an immaterial effect on the value of the goodwill recognized. The allocation will be updated, if necessary, through the measurement period, which is no later than one year from the acquisition date.
The preliminary allocation of the $54.6 million purchase price consists of $6.5 million of fair value of tangible assets acquired, $3.4 million of liabilities assumed, $27.1 million of identifiable intangible assets and $24.4 million of goodwill, all of which is expected to be deductible for tax purposes. Identifiable intangible assets with a finite useful are amortized on a straight-line basis. Goodwill was calculated as the excess of consideration exchanged over the fair value of identifiable net assets acquired. The goodwill includes synergies expected to result from combining the acquired assets and liabilities with existing operations, coupling its custody platform with the Company existing product offerings and leveraging customer relationships through RIAs. The following table summarizes the fair value and useful life of each intangible asset acquired as of the acquisition date:
($ in thousands) Fair Value Useful Lives (Years)
Trade Name $ 290  0.16
Proprietary Technology 10,990  7
Customer Relationships 15,650  14
Non-Compete Agreements 130  1
$ 27,060 

The pro forma results of operations and the results of operations since the acquisition date have not been separately disclosed because the effects were not material to the consolidated financial statements.




8
3.     FAIR VALUE
Fair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC Topic 820, Fair Value Measurement, establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The following table sets forth the Company’s financial assets and liabilities measured at fair value on a recurring basis at September 30, 2021 and June 30, 2021. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
September 30, 2021
(Dollars in thousands) Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) 		Significant Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3) 		Total
ASSETS:
Securities—Trading: Municipal $ —  $ 1,941  $ —  $ 1,941 
Securities—Available-for-Sale:
Agency Debt1
$ —  $ —  $ —  $ — 
Agency MBS1
—  24,526  —  24,526 
Non-Agency MBS2
—  —  59,851  59,851 
Municipal —  3,501  —  3,501 
Asset-backed securities and structured notes —  48,118  —  48,118 
Total—Securities—Available-for-Sale $ —  $ 76,145  $ 59,851  $ 135,996 
Loans Held for Sale $ —  $ 33,344  $ —  $ 33,344 
Mortgage servicing rights $ —  $ —  $ 18,438  $ 18,438 
Other assets—Derivative instruments $ —  $ —  $ 2,292  $ 2,292 
LIABILITIES:
   Other liabilities—Derivative instruments $ —  $ —  $ 66  $ 66 
June 30, 2021
(Dollars in thousands) Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) 		Significant Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3) 		Total
ASSETS:
Securities—Trading: Municipal
$ —  $ 1,983  $ —  $ 1,983 
Securities—Available-for-Sale:
Agency Debt1
$ —  $ —  $ —  $ — 
Agency MBS1
—  23,913  —  23,913 
Non-Agency MBS2
—  —  67,615  67,615 
Municipal —  3,565  —  3,565 
Asset-backed securities and structured notes —  92,242  —  92,242 
Total—Securities—Available-for-Sale $ —  $ 119,720  $ 67,615  $ 187,335 
Loans Held for Sale $ —  $ 29,768  $ —  $ 29,768 
Mortgage servicing rights $ —  $ —  $ 17,911  $ 17,911 
Other assets—Derivative instruments $ —  $ —  $ 2,280  $ 2,280 
LIABILITIES:
Other liabilities—Derivative instruments $ —  $ —  $ 75  $ 75 
1Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac.
2Private sponsors of securities collateralized primarily by first-lien mortgage loans on commercial properties or by pools of 1-4 family residential first mortgages. Primarily super senior securities secured by Alt-A or pay-option ARM mortgages.
9
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
September 30, 2021
(Dollars in thousands) Securities – Available-for-Sale: Non-Agency MBS Mortgage Servicing Rights Derivative Instruments, net Total
Opening balance $ 67,615  $ 17,911  $ 2,205  $ 87,731 
Included in earnings—Mortgage banking income —  (1,185) 21  (1,164)
Included in other comprehensive income (112) —  —  (112)
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions —  1,712  —  1,712 
Settlements (7,652) —  —  (7,652)
Closing balance $ 59,851  $ 18,438  $ 2,226  $ 80,515 
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period $ —  $ (1,185) $ 21  $ (1,164)

For the Three Months Ended
September 30, 2020
(Dollars in thousands) Securities – Available-for-Sale: Non-Agency MBS Mortgage Servicing Rights Derivative Instruments, net Total
Opening balance $ 18,332  $ 10,675  $ 7,416  $ 36,423 
Included in earnings—Mortgage banking income —  (1,795) 5,583  3,788 
Included in other comprehensive income (323) —  —  (323)
Purchases, retentions, issues, sales and settlements:
Purchases/Retentions —  3,250  —  3,250 
Settlements (397) —  —  (397)
Closing balance $ 17,612  $ 12,130  $ 12,999  $ 42,741 
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period $ —  $ (1,795) $ 5,583  $ 3,788 

The table below summarizes the quantitative information about level 3 fair value measurements as of the dates indicated:
September 30, 2021
(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range (Weighted Average)
Securities – Non-agency MBS $ 59,851  Discounted Cash Flow Projected Constant Prepayment Rate,
Projected Constant Default Rate,
Projected Loss Severity,
Discount Rate over LIBOR
0.0 to 33.9% (2.3%)
0.0 to 4.7% (0.4%)
0.0 to 68.3% (9.4%)
2.7 to 6.3% (3.0%)
Mortgage Servicing Rights $ 18,438  Discounted Cash Flow Projected Constant Prepayment Rate,
Life (in years),
Discount Rate
6.9 to 37.2% (11.2%)
1.6 to 7.7 (6.5)
9.5 to 14.0% (9.6%)
Derivative Instruments $ 2,226  Sales Comparison Approach Projected Sales Profit of Underlying Loans
0.2 to 0.9% (0.5%)
June 30, 2021
(Dollars in thousands) Fair Value Valuation Technique Unobservable Input Range (Weighted Average)
Securities – Non-agency MBS $ 67,615  Discounted Cash Flow Projected Constant Prepayment Rate,
Projected Constant Default Rate,
Projected Loss Severity,
Discount Rate over LIBOR
0.0 to 25.0% (2.7%)
0.0 to 5.6% (0.6%)
0.0 to 100.0% (19.4%)
2.7 to 7.2% (3.1%)
Mortgage Servicing Rights $ 17,911  Discounted Cash Flow Projected Constant Prepayment Rate,
Life (in years),
Discount Rate
7.5 to 37.4% (11.5%)
1.7 to 7.5 (6.4)
9.5 to 13.0% (9.6%)
Derivative Instruments $ 2,205  Sales Comparison Approach Projected Sales Profit of Underlying Loans
0.2 to 0.5% (0.3%)
10
The significant unobservable inputs used in the fair value measurement of the Company’s residential mortgage-backed securities are projected prepayment rates, probability of default, and projected loss severity in the event of default. Significant increases (decreases) in any of those inputs in isolation would result in a significantly lower (higher) fair value measurement. Generally, a change in the assumption used for the probability of default is accompanied by a directionally similar change in the assumption used for the projected loss severity and a directionally opposite change in the assumption used for projected prepayment rates.
The table below summarizes assets measured for impairment on a non-recurring basis:
September 30, 2021
(Dollars in thousands) Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) 		Significant Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3) 		Balance
Other real estate owned and foreclosed assets:
Single family real estate $ —  $ —  $ 6,114  $ 6,114 
Autos and RVs —  —  206  206 
Total $ —  $ —  $ 6,320  $ 6,320 
June 30, 2021
(Dollars in thousands) Quoted Prices in
Active Markets
for Identical
Assets
(Level 1) 		Significant Other
Observable
Inputs
(Level 2) 		Significant
Unobservable
Inputs
(Level 3) 		Balance
Other real estate owned and foreclosed assets:
Single family real estate $ —  $ —  $ 6,547  $ 6,547 
Autos and RVs —  —  235  235 
Total $ —  $ —  $ 6,782  $ 6,782 
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 $6,320 after charge-offs of $12 for the three months ended September 30, 2021.
The Company has elected the fair value option for Agency loans held for sale. These loans are intended for sale and the Company believes that the fair value is the best indicator of the resolution of these loans. Interest income is recorded based on the contractual terms of the loan and in accordance with the Company’s policy on loans held for investment. None of these loans are 90 days or more past due nor on nonaccrual as of September 30, 2021 and June 30, 2021.
As of September 30, 2021 and June 30, 2021, the aggregate fair value of loans held for sale, carried at fair value, contractual balance (including accrued interest), and unrealized gain was as follows:
(Dollars in thousands) September 30, 2021 June 30, 2021
Aggregate fair value $ 33,344  $ 29,768 
Contractual balance 32,494  28,940 
Unrealized gain $ 850  $ 828 
The total amount of gains and losses from changes in fair value included in earnings for the period indicated below for loans held for sale were:
For the Three Months Ended
September 30,
(Dollars in thousands) 2021 2020
Interest income $ 200  $ 382 
Change in fair value 43  6,885 
Total $ 243  $ 7,267 
11
The following table presents quantitative information about level 3 fair value measurements for financial instruments measured at fair value on a non-recurring basis at the periods indicated:
September 30, 2021
(Dollars in thousands) Fair Value Valuation Technique(s) Unobservable Input
Range (Weighted Average) 1
Other real estate owned and foreclosed assets:
Single family real estate $ 6,114  Sales comparison approach Adjustment for differences between the comparable sales
(3.8) to 0.9% (0.1%)
Autos and RVs $ 206  Sales comparison approach Adjustment for differences between the comparable sales
1.5 to 21.5% (1.5%)
June 30, 2021
(Dollars in thousands) Fair Value Valuation Technique(s) Unobservable Input
Range (Weighted Average) 1
Other real estate owned and foreclosed assets:
Single family real estate $ 6,547  Sales comparison approach Adjustment for differences between the comparable sales
(1.5) to 6.1% (2.0%)
Autos and RVs $ 235  Sales comparison approach Adjustment for differences between the comparable sales
(2.1) to 14.7% (2.1%)
1 For other real estate owned and foreclosed assets the ranges shown may vary positively or negatively based on the comparable sales reported in the current appraisal. In certain instances, the range can be significant due to small sample sizes and in some cases the property being valued having limited comparable sales with similar characteristics at the time the current appraisal is conducted.

12
Fair value of Financial Instruments
The carrying amounts and estimated fair values of financial instruments at September 30, 2021 and June 30, 2021 were as follows:
September 30, 2021
Fair Value
(Dollars in thousands) Carrying
Amount 		Level 1 Level 2 Level 3 Total Fair Value
Financial assets:
Cash and cash equivalents $ 1,269,434  $ 1,269,434  $ —  $ —  $ 1,269,434 
Securities — trading 1,941  —  1,941  —  1,941 
Securities — available-for-sale 135,996  —  76,145  59,851  135,996 
Loans held for sale, at fair value 33,344  —  33,344  —  33,344 
Loans held for sale, at lower of cost or fair value 11,949  —  —  12,041  12,041 
Loans held for investment—net 11,879,021  —  —  12,252,262  12,252,262 
Securities borrowed 457,282  —  —  457,282  457,282 
Customer, broker-dealer and clearing receivables 427,169  —  —  427,297  427,297 
Mortgage servicing rights 18,438  —  —  18,438  18,438 
Financial liabilities:
Total deposits 11,747,442  —  11,191,110  —  11,191,110 
Advances from the Federal Home Loan Bank 157,500  —  157,500  —  157,500 
Borrowings, subordinated notes and debentures 255,896  —  251,279  —  251,279 
Securities loaned 539,505  —  —  541,339  541,339 
Customer, broker-dealer and clearing payables 510,040  —  —  510,040  510,040 
June 30, 2021
Fair Value
(Dollars in thousands) Carrying
Amount 		Level 1 Level 2 Level 3 Total Fair Value
Financial assets:
Cash and cash equivalents $ 1,037,777  $ 1,037,777  $ —  $ —  $ 1,037,777 
Securities — trading 1,983  —  1,983  —  1,983 
Securities — available-for-sale 187,335  —  119,720  67,615  187,335 
Loans held for sale, at fair value 29,768  —  29,768  —  29,768 
Loans held for sale, at lower of cost or fair value 12,294  —  —  12,336  12,336 
Loans held for investment—net 11,414,814  —  —  11,833,102  11,833,102 
Securities borrowed 619,088  —  —  619,274  619,274 
Customer, broker-dealer and clearing receivables 369,815  —  —  369,815  369,815 
Mortgage servicing rights 17,911  —  —  17,911  17,911 
Financial liabilities:
Total deposits 10,815,797  —  10,297,450  —  10,297,450 
Advances from the Federal Home Loan Bank 353,500  —  353,500  —  353,500 
Borrowings, subordinated notes and debentures 221,358  —  210,196  —  210,196 
Securities loaned 728,988  —  —  731,467  731,467 
Customer, broker-dealer and clearing payables 535,425  —  —  535,425  535,425 
13
The methods and assumptions, not previously presented, used to estimate fair value are described as follows: Carrying amount is the estimated fair value for cash and cash equivalents, interest bearing deposits, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans, deposits, borrowings or subordinated debt and for variable rate loans, deposits, borrowings or subordinated debt with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. A discussion of the methods of valuing trading securities, available for sale securities and loans held for sale can be found in Note 3 – “Fair Value” of our Form 10-K for the year ended June 30, 2021. The carrying amount of stock of regulatory agencies approximates the estimated fair value of this investment. The fair value of off-balance sheet items is not considered material.
4.     SECURITIES
The amortized cost, carrying amount and fair value for the trading and available-for-sale securities at September 30, 2021 and June 30, 2021 were:
September 30, 2021
Trading Available-for-sale
(Dollars in thousands) Fair
Value 		Amortized
Cost 		Unrealized
Gains 		Unrealized
Losses 		Fair
Value
Mortgage-backed securities (MBS):
U.S. agencies1
$ —  $ 24,362  $ 356  $ (192) $ 24,526 
Non-agency2
—  57,522  2,718  (389) 59,851 
Total mortgage-backed securities —  81,884  3,074  (581) 84,377 
Non-MBS:
Municipal 1,941  3,437  64  —  3,501 
Asset-backed securities and structured notes —  46,889  1,229  —  48,118 
Total Non-MBS 1,941  50,326  1,293  —  51,619 
Total debt securities $ 1,941  $ 132,210  $ 4,367  $ (581) $ 135,996 
June 30, 2021
Trading Available-for-sale
(Dollars in thousands) Fair
Value 		Amortized
Cost 		Unrealized
Gains 		Unrealized
Losses 		Fair
Value
Mortgage-backed securities (MBS):
U.S. agencies1
$ —  $ 23,639  $ 420  $ (146) $ 23,913 
Non-agency2
—  65,174  2,862  (421) 67,615 
Total mortgage-backed securities —  88,813  3,282  (567) 91,528 
Non-MBS:
Municipal 1,983  3,466  99  —  3,565 
Asset-backed securities and structured notes —  90,549  1,693  —  92,242 
Total Non-MBS 1,983  94,015  1,792  —  95,807 
Total debt securities $ 1,983  $ 182,828  $ 5,074  $ (567) $ 187,335 
1Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac.
2Private sponsors of securities collateralized primarily by first-lien mortgage loans on commercial properties or by pools of 1-4 family residential first mortgages. Primarily super senior securities secured by Alt-A or pay-option ARM mortgages.

The Company’s non-agency MBS available-for-sale portfolio with a total fair value of $59,851 at September 30, 2021 consists of 14 different issues of super senior securities.
The face amounts of debt securities available-for-sale that were pledged to secure borrowings at September 30, 2021 and June 30, 2021 were $1.3 million and $1.4 million, respectively.
14
The securities with unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position were as follows:
September 30, 2021
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:
U.S. agencies $ 11,127  $ (192) $ —  $ —  $ 11,127  $ (192)
Non-agency —  —  5,676  (389) 5,676  (389)
Total MBS 11,127  (192) 5,676  (389) 16,803  (581)
Non-MBS:
U.S. agencies —  —  —  —  —  — 
Total Non-MBS —  —  —  —  —  — 
Total debt securities $ 11,127  $ (192) $ 5,676  $ (389) $ 16,803  $ (581)
June 30, 2021
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:
U.S. agencies $ 10,001  $ (146) $ —  $ —  $ 10,001  $ (146)
Non-agency —  —  6,018  (421) 6,018  (421)
Total MBS 10,001  (146) 6,018  (421) 16,019  (567)
Non-MBS:
Municipal debt —  —  —  —  —  — 
Asset-backed securities and structured notes —  —  —  —  —  — 
Total Non-MBS —  —  —  —  —  — 
Total debt securities $ 10,001  $ (146) $ 6,018  $ (421) $ 16,019  $ (567)
On September 30, 2021, there were seven securities in a continuous loss position for a period of more than 12 months, and nine securities in a continuous loss position for a period of less than 12 months. At June 30, 2021, there were seven securities in a continuous loss position for a period of more than 12 months, and seven securities in a continuous loss position for a period of less than 12 months.
At September 30, 2021, one non-agency RMBS with a total carrying amount of $2.8 million was determined to have cumulative credit losses of $0.8 million of which none was recognized in earnings during the three months ended September 30, 2021.
During the three months ended September 30, 2020, the company sold no available-for-sale securities. During the three months ended September 30, 2021, the company sold no available-for-sale securities.
The Company had recorded unrealized gains and unrealized losses in accumulated other comprehensive loss as follows:
(Dollars in thousands) September 30,
2021 		June 30,
2021
Available-for-sale debt securities—net unrealized gains (losses) $ 3,786  $ 4,507 
Available-for-sale debt securities—non-credit related losses (845) (845)
Subtotal 2,941  3,662 
Tax benefit (expense) (941) (1,155)
Net unrealized gain (loss) on investment securities in accumulated other comprehensive income (loss) $ 2,000  $ 2,507 


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5.    LOANS & ALLOWANCE FOR CREDIT LOSSES
The following table sets forth the composition of the loan portfolio as of the dates indicated:
(Dollars in thousands) September 30, 2021 June 30, 2021
Single Family - Mortgage & Warehouse $ 4,341,174  $ 4,359,472 
Multifamily and Commercial Mortgage 2,458,200  2,470,454 
Commercial Real Estate 3,492,926  3,180,453 
Commercial & Industrial - Non-RE 1,239,354  1,123,869 
Auto & Consumer 446,656  362,180 
Other 42,672  58,316 
Total gross loans and leases 12,020,982  11,554,744 
Allowance for credit losses - loans (136,778) (132,958)
Unaccreted premiums (discounts) and loan and lease fees (5,183) (6,972)
Total net loans and leases $ 11,879,021  $ 11,414,814 
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The following tables summarize activity in the allowance for credit losses - loans by portfolio classes for the periods indicated.
For the Three Months Ended September 30, 2021
(Dollars in thousands) Single Family-Mortgage & Warehouse Multifamily and Commercial Mortgage Commercial Real Estate Commercial & Industrial - Non-RE Auto & Consumer Other Total
Balance at July 1, 2021 $ 26,604  $ 13,146  $ 57,928  $ 28,460  $ 6,519  $ 301  $ 132,958 
Provision for credit losses - loans (1,351) 36  7,295  (5,646) 3,626  40  4,000 
Charge-offs —  —  —  (322) (394) —  (716)
Recoveries 76  177  —  27  256  —  536 
Balance at September 30, 2021 $ 25,329  $ 13,359  $ 65,223  $ 22,519  $ 10,007  $ 341  $ 136,778 
For the Three Months Ended September 30, 2020
(Dollars in thousands) Single Family-Mortgage & Warehouse Multifamily and Commercial Mortgage Commercial Real Estate Commercial & Industrial - Non-RE Auto & Consumer Other Total
Balance at July 1, 2020 $ 25,901  $ 4,718  $ 21,052  $ 9,954  $ 9,461  $ 4,721  $ 75,807 
Effect of Adoption of ASC 326
6,318  7,408  25,893  7,042  610  29  47,300 
Provision for credit losses - loans (2,439) 293  2,253  6,512  (1,087) 6,268  11,800 
Charge-offs (1,489) —  —  (213) (736) —  (2,438)
Recoveries 16  —  —  —  430  —  446 
Balance at September 30, 2020 $ 28,307  $ 12,419  $ 49,198  $ 23,295  $ 8,678  $ 11,018  $ 132,915 

Credit Quality Disclosures. Nonaccrual loans consisted of the following as of the dates indicated:
As of September 30, 2021
(Dollars in thousands) With Allowance With No Allowance Total
Single Family - Mortgage & Warehouse $ 53,000  $ 58,257  $ 111,257 
Multifamily and Commercial Mortgage —  6,964  6,964 
Commercial Real Estate 15,539  —  15,539 
Commercial & Industrial - Non-RE —  —  — 
Auto & Consumer 311  63  374 
Other —  —  — 
     Total nonaccrual loans $ 68,850  $ 65,284  $ 134,134 
Nonaccrual loans to total loans 1.12  %


As of September 30, 2020
(Dollars in thousands) With Allowance With No Allowance Total
Single Family - Mortgage & Warehouse $ 76,032  $ 56,894  $ 132,926 
Multifamily and Commercial Mortgage 31,001  1,847  32,848 
Commercial Real Estate —  —  — 
Commercial & Industrial - Non-RE 5,580  —  5,580 
Auto & Consumer 623  131  754 
Other —  —  — 
     Total nonaccrual loans $ 113,236  $ 58,872  $ 172,108 
Nonaccrual loans to total loans 1.56  %
No interest income was recognized in either the three months ended September 30, 2021 or September 30, 2020.
Approximately 0.58% of our nonaccrual loans at September 30, 2021 were considered troubled debt restructurings (“TDRs”), compared to 0.55% at June 30, 2021. Borrowers that make timely payments after TDRs are considered non-performing for at least six months. Generally, after six months of timely payments, those TDRs are reclassified from the nonaccrual loan category to the performing loan category and any previously deferred interest income is recognized. Approximately 82.94% of the Bank’s nonaccrual loans are single family first mortgages.
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The following tables present the outstanding unpaid balance of loans that are performing and nonaccrual by portfolio class:
September 30, 2021
(Dollars in thousands) Single Family-Mortgage & Warehouse Multifamily and Commercial Mortgage Commercial Real Estate Commercial & Industrial - Non-RE Auto & Consumer Other Total
Performing $ 4,229,917  $ 2,451,236  $ 3,477,387  $ 1,239,354  $ 446,282  $ 42,672  $ 11,886,848 
Nonaccrual 111,257  6,964  15,539  —  374  —  134,134 
          Total $ 4,341,174  $ 2,458,200  $ 3,492,926  $ 1,239,354  $ 446,656  $ 42,672  $ 12,020,982 
June 30, 2021
(Dollars in thousands) Single Family-Mortgage & Warehouse Multifamily and Commercial Mortgage Commercial Real Estate Commercial & Industrial - Non-RE Auto & Consumer Other Total
Performing $ 4,253,764  $ 2,450,026  $ 3,164,614  $ 1,120,927  $ 361,902  $ 58,316  $ 11,409,549 
Nonaccrual 105,708  20,428  15,839  2,942  278  —  145,195 
          Total $ 4,359,472  $ 2,470,454  $ 3,180,453  $ 1,123,869  $ 362,180  $ 58,316  $ 11,554,744 

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


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, among other factors. The Company analyzes loans individually by classifying the loans based on credit risk. The Company uses the following definitions for risk ratings.
Pass. Loans classified as pass are well protected by the current net worth and paying capacity of the obligor or by the fair value, less cost to acquire and sell, of any underlying collateral 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 amortized cost basis by year of origination and credit quality indicator of the Company’s loans as of September 30, 2021 was as follows:
Loans Held for Investment Origination Year Revolving Loans Total
(Dollars in thousands) 2022 2021 2020 2019 2018 Prior
Single Family-Mortgage & Warehouse
Pass 426,455  864,201  600,147  437,648  398,728  818,420  636,138  4,181,737 
Special Mention —  79  2,321  4,020  1,934  6,452  19,678  34,484 
Substandard —  962  31,726  21,071  18,766  52,428  —  124,953 
Doubtful —  —  —  —  —  —  —  — 
Total 426,455  865,242  634,194  462,739  419,428  877,300  655,816  4,341,174 
Multifamily and Commercial Mortgage
Pass 125,467  632,033  539,154  339,602  274,135  460,901  —  2,371,292 
Special Mention —  —  3,408  17,787  849  2,517  —  24,561 
Substandard —  4,934  29,378  3,518  10,459  14,058  —  62,347 
Doubtful —  —  —  —  —  —  —  — 
Total 125,467  636,967  571,940  360,907  285,443  477,476  —  2,458,200 
Commercial Real Estate
Pass 543,531  1,237,401  823,096  446,460  81,563  —  232,244  3,364,295 
Special Mention —  —  70,664  15,487  —  —  —  86,151 
Substandard —  —  24,843  —  15,539  —  2,098  42,480 
Doubtful —  —  —  —  —  —  —  — 
Total 543,531  1,237,401  918,603  461,947  97,102  —  234,342  3,492,926 
Commercial & Industrial - Non-RE
Pass 38,438  44,235  81,009  15,678  20,553  5,251  1,018,136  1,223,300 
Special Mention —  —  —  243  1,002  —  —  1,245 
Substandard —  2,989  11,717  —  103  —  —  14,809 
Doubtful —  —  —  —  —  —  —  — 
Total 38,438  47,224  92,726  15,921  21,658  5,251  1,018,136  1,239,354 
Auto & Consumer
Pass 116,492  153,678  68,587  60,356  27,664  18,760  —  445,537 
Special Mention —  79  62  49  30  —  —  220 
Substandard 23  125  291  371  68  21  —  899 
Doubtful —  —  —  —  —  —  —  — 
Total 116,515  153,882  68,940  60,776  27,762  18,781  —  446,656 
Other
Pass 2,088  13,121  24,422  —  1,588  1,453  —  42,672 
Special Mention —  —  —  —  —  —  —  — 
Substandard —  —  —  —  —  —  —  — 
Doubtful —  —  —  —  —  —  —  — 
Total 2,088  13,121  24,422  —  1,588  1,453  —  42,672 
Total
Pass 1,252,471  2,944,669  2,136,415  1,299,744  804,231  1,304,785  1,886,518  11,628,833 
Special Mention —  158  76,455  37,586  3,815  8,969  19,678  146,661 
Substandard 23  9,010  97,955  24,960  44,935  66,507  2,098  245,488 
Doubtful —  —  —  —  —  —  —  — 
Total 1,252,494  2,953,837  2,310,825  1,362,290  852,981  1,380,261  1,908,294  12,020,982 
As a % of total gross loans 10.42  % 24.57  % 19.22  % 11.33  % 7.10  % 11.48  % 15.87  % 100.0  %

The Company considers the performance of the loan portfolio and its impact on the allowance for credit losses - loans. The Company also evaluates credit quality based on the aging status of its loans. During the year, the Company holds certain short-term loans that do not have a fixed maturity date that are treated as delinquent if not paid in full 90 days after the origination date.
The Company took proactive measures to manage loans that became delinquent during the recent economic downturn as a result of the COVID-19 pandemic. As of September 30, 2021, no loans were on forbearance status for forbearance granted from any prior date. Any forbearance granted out of COVID-19 was for six months or less. Additionally, no forbearance or deferral of payment obligation was granted to any borrower during the three months ended September 30, 2021.
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The following tables provide the outstanding unpaid balance of loans that are past due 30 days or more by portfolio class as of the dates indicated:
September 30, 2021
(Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due 90+ Days Past Due Total
Single Family-Mortgage & Warehouse $ 34,876  $ 7,480  $ 96,850  $ 139,206 
Multifamily and Commercial Mortgage 8,071  2,567  1,055  11,693 
Commercial Real Estate 3,100  —  —  3,100 
Commercial & Industrial - Non-RE —  —  —  — 
Auto & Consumer 1,841  363  241  2,445 
Other 216  —  —  216 
Total $ 48,104  $ 10,410  $ 98,146  $ 156,660 
As a % of total gross loans 0.40  % 0.09  % 0.82  % 1.30  %

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

Allowance for Credit Losses
The allowance for credit losses is the sum of the allowance for credit losses - loans and unfunded loan commitment liabilities. Unfunded loan commitment liabilities are included in “Accounts payable, accrued liabilities and other liabilities” in the unaudited Condensed Consolidated Balance Sheets. Provisions for the unfunded loan commitments are included in “General and administrative expenses” in the unaudited Condensed Consolidated Statements of Income.
The following tables present a summary of the activity in the allowance for credit losses for the periods indicated:
Three Months Ended September 30, 2021
(Dollars in thousands) Allowance for Credit Losses - Loans Unfunded Loan Commitment Liabilities Total Allowance for Credit Losses
Balance at July 1, 2021 $ 132,958  $ 5,723  $ 138,681 
Provision for Credit Losses 4,000  2,000  6,000 
Charge-offs (716) —  (716)
Recoveries 536  —  536 
Balance at September 30, 2021 $ 136,778  $ 7,723  $ 144,501 

Three Months Ended September 30, 2020
(Dollars in thousands) Allowance for Credit Losses - Loans Unfunded Loan Commitment Liabilities Total Allowance for Credit Losses
Balance at July 1, 2020 $ 75,807  $ 323  $ 76,130 
Effect of Adoption of ASC 326
47,300  5,700  53,000 
Provision for Credit Losses 11,800  700  12,500 
Charge-offs (2,438) —  (2,438)
Recoveries 446  —  446 
Balance at September 30, 2020 $ 132,915  $ 6,723  $ 139,638 


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6.    EQUITY AND STOCK-BASED COMPENSATION
    Restricted Stock Units. During the three months ended September 30, 2021 and 2020, the Company granted 298,644 and 435,381 restricted stock unit awards (“RSUs”) to employees and directors, and during the three months ended September 30, 2021 granted 478,353 RSU’s to the chief executive officer, which vest ratably on each of the four fiscal year ends after the issue date. All other RSUs granted during these quarters generally vest over 3 years, one-third on each anniversary date. On October 21, 2021, stockholders approved an additional one million shares for the Company’s equity compensation.
    The Company’s pre-tax income and net income for the three months ended September 30, 2021 and 2020 include stock award expense of $4.0 million and $4.4 million, with total income tax benefit of $1.2 million and $1.3 million, respectively. The Company recognizes compensation expense based upon the grant-date fair value divided by the vesting and the service period between each vesting date. At September 30, 2021, unrecognized compensation expense related to non-vested awards aggregated to $37.0 million and is expected to be recognized in future periods as follows:
(Dollars in thousands) Stock Award
Compensation
Expense
For the fiscal year remainder:
2022 $ 14,021 
2023 13,740 
2024 7,900 
2025 1,271 
2026 101 
Total $ 37,033 

    The following table presents the status and changes in restricted stock units for the periods indicated:
Restricted
Stock Units 		Weighted-Average
Grant-Date
Fair Value
Non-vested balance at June 30, 2020 1,445,540  $ 28.62 
Granted 617,833  32.12 
Vested (666,790) 29.23 
Forfeited (176,113) 27.42 
Non-vested balance at June 30, 2021 1,220,470  $ 30.18 
Granted 776,997  48.50 
Vested (301,296) 28.28 
Forfeited (21,423) 32.84 
Non-vested balance at September 30, 2021 1,674,748  $ 39.03 
    The total fair value of shares vested for the three months ended September 30, 2021 was $14,485. The total fair value of shares vested for the three months ended September 30, 2020 was $6,602.
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7.    EARNINGS PER COMMON SHARE
    Earnings per common share (“EPS”) are presented under two formats: basic EPS and diluted EPS. Basic EPS is computed by dividing the net income attributable to common stock (net income after deducting dividends on preferred stock and preferred stock redemption charge) by the sum of the weighted-average number of common shares outstanding during the year and the unvested average of participating RSUs. Diluted EPS is computed by dividing the sum of net income attributable to common stock and dividends on diluted preferred stock by the sum of the weighted-average number of common shares outstanding during the year and the impact of dilutive potential common shares, such as nonparticipating RSUs, stock options and convertible preferred stock.
    The unvested stock-based compensation awards issued under the 2014 Stock Incentive Plan, have no stockholder rights, meaning they are not entitled to dividends and are considered nonparticipating. The Company does not include these nonparticipating RSUs in the basic EPS calculation but are included in the diluted EPS calculation using the treasury stock method.
The following table presents the calculation of basic and diluted EPS:
Three Months Ended
September 30,
(Dollars in thousands, except per share data) 2021 2020
Earnings Per Common Share
Net income $ 60,210  $ 53,022 
Preferred stock dividends —  (77)
Net income attributable to common stockholders $ 60,210  $ 52,945 
Average common shares outstanding 59,390,846  59,509,320 
Total qualifying shares 59,390,846  59,509,320 
Earnings per common share $ 1.01  $ 0.89 
Diluted Earnings Per Common Share
Net income attributable to common stockholders $ 60,210  $ 52,945 
Average common shares issued and outstanding 59,390,846  59,509,320 
Dilutive effect of average unvested RSUs 1,253,442  417,464 
Total dilutive common shares outstanding 60,644,288  59,926,784 
Diluted earnings per common share $ 0.99  $ 0.88 

8.    COMMITMENTS AND CONTINGENCIES
COVID-19 Impact. The Company has closely monitored the rapid developments of and uncertainties caused by the COVID-19 pandemic. In response to the changes in economic and business conditions as a result of the COVID-19 pandemic, the Company continues to take the necessary and appropriate actions to support customers, employees, partners and shareholders.
The Company took proactive measures to manage loans that became delinquent during the recent economic downturn as a result of the COVID-19 pandemic. As of September 30, 2021, no loans were on forbearance status for a forbearance granted from any prior date. Any forbearance granted out of COVID-19 was for six months or less.
The Company will continue to monitor uncertainties caused by and developments of COVID-19.
Operating Leases. The Company leases office space under operating lease agreements scheduled to expire at various dates. The following table represents maturities of lease liabilities as of September 30, 2021 in the corresponding fiscal years:
22
(Dollars in thousands)
Remainder of 2022 $ 7,464 
2023 10,216 
2024 9,849 
2025 9,673 
2026 9,336 
Thereafter 35,894 
Total lease payments 82,432 
Less: amount representing interest (9,122)
Total Lease Liability $ 73,310 

Credit-Related Financial Instruments. The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the unaudited condensed consolidated balance sheets.
The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.
At September 30, 2021, the Company had commitments to originate $60.9 million in fixed rate loans and $1,007.7 million in variable rate loans, totaling an aggregate outstanding principal balance of $1,068.7 million. At September 30, 2021, the Company’s fixed rate commitments to originate had a weighted-average rate of 1.92%. At September 30, 2021, the Company also had commitments to sell $56.1 million in fixed rate loans and none in variable rate loans, totaling an aggregate outstanding principal balance of $56.1 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’s customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose Axos Clearing to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and Axos Clearing has to purchase or sell the financial instrument underlying the contract at a loss. Axos Clearing’s clearing agreements with broker-dealers for which it provides clearing services requires them to indemnify Axos Clearing if customers fail to satisfy their contractual obligation.
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Litigation. On October 15, 2015, the Company, its Chief Executive Officer and its Chief Financial Officer were named defendants in a putative class action lawsuit styled Golden v. BofI Holding, Inc., et al, and brought in United States District Court for the Southern District of California (the “Golden Case”). On November 3, 2015, the Company, its Chief Executive Officer and its Chief Financial Officer were named defendants in a second putative class action lawsuit styled Hazan v. BofI Holding, Inc., et al, and also brought in the United States District Court for the Southern District of California (the “Hazan Case”). On February 1, 2016, the Golden Case and the Hazan Case were consolidated as In re BofI Holding, Inc. Securities Litigation, Case #: 3:15-cv-02324-GPC-KSC (the “Class Action”), and the Houston Municipal Employees Pension System was appointed lead plaintiff. The plaintiffs allege that the Company and other named defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by failing to disclose wrongful conduct that was alleged in a complaint filed in connection with a wrongful termination of employment lawsuit filed on October 13, 2015 (the “Employment Matter”) and that as a result the Company’s statements regarding its internal controls, as well as portions of its financial statements, were false and misleading. On March 21, 2018, the Court entered a final order dismissing the Class Action with prejudice. Subsequently, the plaintiff appealed, the Court overturned the dismissal and the Company is preparing a petition for a rehearing.
On April 3, 2017, the Company, its Chief Executive Officer and its Chief Financial Officer were named defendants in a putative class action lawsuit styled Mandalevy v. BofI Holding, Inc., et al, and brought in United States District Court for the Southern District of California (the “Mandalevy Case”). The Mandalevy Case seeks monetary damages and other relief on behalf of a putative class that has not been certified by the Court. The complaint in the Mandalevy Case (the “Mandalevy Complaint”) alleges a class period that differs from that alleged in the First Class Action, and that the Company and other named defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by failing to disclose wrongful conduct that was alleged in a March 2017 media article. The Mandalevy Case has not been consolidated into the First Class Action. On December 7, 2018, the Court entered a final order granting the defendants’ motion and dismissing the Mandalevy Case with prejudice. Subsequently, the plaintiff filed a notice of appeal and the Court took the matter under advisement. On November 3, 2020, the Court issued a ruling affirming in part and reversing in part the District Court's Order dismissing the Class Action Second Amended Complaint. The defendants filed a petition for rehearing en banc on November 17, 2020, which petition was denied on December 16, 2020. The defendants filed a motion to dismiss the remanded complaint on February 19, 2021.
The Company and the other named defendants dispute the allegations of wrongdoing advanced by the plaintiffs in the Class Action, the Mandalevy Case, and in the Employment Matter, as well as those plaintiffs’ statement of the underlying factual circumstances, and are vigorously defending each case.
In addition to the First Class Action and the Mandalevy Case, two separate shareholder derivative actions were filed in December, 2015, purportedly on behalf of the Company. The first derivative action, Calcaterra v. Garrabrants, et al, was filed in the United States District Court for the Southern District of California on December 3, 2015. The second derivative action, Dow v. Micheletti, et al, was filed in the San Diego County Superior Court on December 16, 2015. A third derivative action, DeYoung v. Garrabrants, et al, was filed in the United States District Court for the Southern District of California on January 22, 2016, a fourth derivative action, Yong v. Garrabrants, et al, was filed in the United States District Court for the Southern District of California on January 29, 2016, a fifth derivative action, Laborers Pension Trust Fund of Northern Nevada v. Allrich et al, was filed in the United States District Court for the Southern District of California on February 2, 2016, and a sixth derivative action, Garner v. Garrabrants, et al, was filed in the San Diego County Superior Court on August 10, 2017. Each of these six derivative actions names the Company as a nominal defendant, and certain of its officers and directors as defendants. Each complaint sets forth allegations of breaches of fiduciary duties, gross mismanagement, abuse of control, and unjust enrichment against the defendant officers and directors. The plaintiffs in these derivative actions seek damages in unspecified amounts on the Company’s behalf from the officer and director defendants, certain corporate governance actions, and an award of their costs and attorney’s fees.
The United States District Court for the Southern District of California ordered the four above-referenced derivative actions pending before it to be consolidated and appointed lead counsel in the consolidated action. On June 7, 2018, the Court entered an order granting defendant’s motion for judgment on the pleadings, but giving the plaintiffs limited leave to amend by June 28, 2018. The plaintiffs failed to file an amended complaint, and instead plaintiffs filed on June 28, 2018 a motion to stay the case pending resolution of the securities class action and Employment Matter. On August 10, 2018, defendants filed an opposition to plaintiffs’ motion. On September 11, 2018, the plaintiffs filed a second amended complaint. On October 16, 2018, defendants filed a motion to dismiss the second amended complaint. On October 16, 2018, defendants filed a motion to dismiss the second amended complaint. The Court dismissed the second amended complaint with prejudice on May 23, 2019. Subsequently, the plaintiff filed a notice of appeal and opening brief and the Company filed its answering brief. Oral argument was held September 2, 2020 and the Court took the matter under advisement.
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The two derivative actions pending before the San Diego County Superior Court have been consolidated and have been stayed by agreement of the parties.
In view of the inherent difficulty of predicting the outcome of each legal action, particularly since claimants seek substantial or indeterminate damages, it is not possible to reasonably predict or estimate the eventual loss or range of loss, if any, related to each legal action.
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9.    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 Company operates through two operating segments: Banking Business and Securities Business.
The Securities Business segment added the RIA custody business from the certain assets and liabilities acquired from EAS. Refer to Note 2 - “Acquisitions” for further detail on the EAS acquisition. Operating results from the EAS acquisition are included in the unaudited consolidated statements of income from the date of acquisition and reported under the Securities Business segment.
In order to reconcile the two segments to the unaudited condensed consolidated totals, the Company includes parent-only activities and intercompany eliminations. The following tables present the operating results, goodwill, and assets of the segments:
Three Months Ended September 30, 2021
(Dollars in thousands) Banking
Business 		Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 142,241  $ 6,176  $ (1,775) $ 146,642 
Provision for credit losses 4,000  —  —  4,000 
Non-interest income 14,828  13,106  (1,232) 26,702 
Non-interest expense 62,725  19,273  2,433  84,431 
Income before taxes $ 90,344  $ 9  $ (5,440) $ 84,913 
Three Months Ended September 30, 2020
(Dollars in thousands) Banking
Business 		Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 123,008  $ 4,894  $ (575) $ 127,327 
Provision for credit losses 11,800  —  —  11,800 
Non-interest income 30,212  5,784  (141) 35,855 
Non-interest expense 61,217  11,352  2,977  75,546 
Income before taxes $ 80,203  $ (674) $ (3,693) $ 75,836 
As of September 30, 2021
(Dollars in thousands) Banking Business Securities Business Corporate/Eliminations Axos Consolidated
Goodwill $ 35,721  $ 59,953  $ —  $ 95,674 
Total Assets $ 13,471,669  $ 1,357,576  $ 77,505  $ 14,906,750 
As of June 30, 2021
(Dollars in thousands) Banking Business Securities Business Corporate/Eliminations Axos Consolidated
Goodwill $ 35,721  $ 35,501  $ —  $ 71,222 
Total Assets $ 12,745,029  $ 1,450,512  $ 70,024  $ 14,265,565 
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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 (the “Company”). This information is intended to facilitate the understanding and assessment of significant changes and trends related to our financial condition and the results of our operations. This discussion and analysis should be read in conjunction with our financial information in our Annual Report on Form 10-K for the year ended June 30, 2021, and the interim unaudited condensed consolidated financial statements and notes thereto contained in this report.
Some matters discussed in this report may constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as such, may involve risks and uncertainties. These forward-looking statements can be identified by the use of terminology such as “estimate,” “project,” “anticipate,” “expect,” “intend,” “believe,” “will,” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. These forward-looking statements relate to, among other things, the effects on our business of the current novel coronavirus pandemic (“COVID-19”), the Company’s financial prospects and other projections of its performance and asset quality, our ability to continue to grow profitably and increase its business, our ability to continue to diversify lending and deposit franchises, and the anticipated timing and financial performance of other offerings, initiatives, and acquisitions, expectations of the environment in which we operate and projections of future performance. Forward-looking statements are inherently unreliable and actual results may vary. Factors that could cause actual results to differ from these forward-looking statements include uncertainties surrounding the severity, duration, and effects of the COVID-19 pandemic, our ability to successfully integrate acquisitions and realize the anticipated benefits of the transactions, changes in the interest rate environment, inflation, government regulation, general economic conditions, changes in the competitive marketplace, conditions in the real estate markets in which we operate, risks associated with credit quality, the outcome and effects of pending class action litigation filed against the Company and other risk factors discussed under the heading “Item 1A. Risk Factors” of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2021 and in our Annual Report on Form 10-K for the year ended June 30, 2021, which has been filed with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. All written and oral forward-looking statements made in connection with this report, which are attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing information.
General
Our Company, the holding company for Axos Bank (the “Bank”), is a diversified financial services company with approximately $14.9 billion in assets that provides consumer and business banking products through its online, low-cost distribution channels and affinity partners. Our Bank has deposit and loan customers nationwide including consumer and business checking, savings and time deposit accounts and financing for single family and multifamily residential properties, small-to-medium size businesses in target sectors, and automobiles. Our Bank generates fee income from consumer and business products including fees from loans originated for sale and transaction fees earned from processing payment activity. Our securities products and services are offered through Axos Clearing LLC (“Axos Clearing”) and its business division Axos Advisor Services (“AAS”), formerly E*TRADE Advisor Services, and Axos Invest, Inc. (“Axos Invest”), which generate interest and fee income by providing comprehensive securities clearing and custody services to introducing broker-dealers and registered investment advisor correspondents and digital investment advisory services to retail investors, respectively. Axos Financial, Inc.’s common stock is listed on the New York Stock Exchange 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.
Our Bank is a federal savings bank wholly-owned by our Company and regulated by the Office of the Comptroller of the Currency (“OCC”), and the Federal Deposit Insurance Corporation (“FDIC”) as its deposit insurer. The Bank must file reports with the OCC and the FDIC concerning its activities and financial condition. As a depository institution with more than $10 billion in assets, our Bank and our affiliates are subject to direct supervision by the Consumer Financial Protection Bureau (“CFPB”).
Axos Clearing is a broker-dealer registered with the SEC and the Financial Industry Regulatory Authority, Inc. (“FINRA”). Axos Invest is a Registered Investment Advisor under the Investment Advisers Act of 1940, that is registered with the SEC, and Axos Invest LLC is an introducing broker-dealer that is registered with the SEC and FINRA.

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Segment Information
The Company determines reportable segments based on what separate financial information is available and what segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance. We operate through two segments: Banking Business and Securities Business.
Banking Business. The Banking Business includes a broad range of banking services including online banking, concierge banking, and mortgage, vehicle and unsecured lending through online and telephonic distribution channels to serve the needs of consumer and small businesses nationally. Our deposit products consist of demand, savings, money market and time deposit accounts. In addition, the Banking Business focuses on providing deposit products nationwide to industry verticals (e.g., Title and Escrow), cash management products to a variety of businesses, and commercial & industrial and commercial real estate lending to clients. The Banking Business also includes a bankruptcy trustee and fiduciary service that provides specialized software and consulting services to Chapter 7 bankruptcy and non-Chapter 7 trustees and fiduciaries.
We distribute our loan products through our retail, correspondent and wholesale channels, and the loans we retain are primarily first mortgages secured by single family real property and by multifamily real property as well as commercial & industrial loans to businesses. Our investment securities consist of agency and non-agency mortgage-backed securities, municipal securities and other non-agency debt securities. We believe our flexibility to adjust our asset generation channels has been a competitive advantage allowing us to avoid markets and products where credit fundamentals are poor or risks and rewards are not sufficient to support our required return on equity.
Securities Business. The Securities Business includes the Clearing Broker-Dealer, Registered Investment Advisor custody business, Registered Investment Advisor, and Introducing Broker-Dealer lines of businesses. These lines of business offer products independently to their own customers as well as to Banking Business clients. The products offered by the lines of business in the Securities Business primarily generate net interest income and non-banking service fee income.
Securities services includes fully disclosed clearing services through Axos Clearing to FINRA- and SEC-registered member firms for trade execution and clearance as well as back-office services such as record keeping, trade and performance reporting, accounting, general back-office support, securities and margin lending, reorganization assistance and custody of securities. We provide financing to our brokerage customers for their securities trading activities through margin loans that are collateralized by securities, cash, or other acceptable collateral. Securities lending activities include borrowing and lending securities with other broker-dealers. These activities involve borrowing securities to cover short sales and to complete transactions in which clients have failed to deliver securities by the required settlement date, and lending securities to other broker dealers for similar purposes.
Through the RIA custody business, we provide a proprietary, turnkey technology platform for custody services for our RIA customers. This platform provides fee income and service that complement our securities business products, while also generating low cost core deposits.
Axos Invest includes our digital wealth management business, which provides our retail customers with self-directed trading and investment management services through a comprehensive and flexible technology platform.
Segment results are compiled based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions or in accordance with generally accepted accounting principles.
The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material inter-segment sales or transfers. Certain corporate administration costs and income taxes have not been allocated to the reportable segments. Therefore, in order to reconcile the two segments to the unaudited condensed consolidated totals, we include parent-only activities and intercompany eliminations.
COVID-19 Impact
The Company has closely monitored the rapid developments of and uncertainties caused by the COVID-19 pandemic. In response to the changes in economic and business conditions as a result of the COVID-19 pandemic, the Company continues to take the necessary and appropriate actions to support customers, employees, partners and shareholders.
The Company took proactive measures to manage loans that became delinquent during the economic downturn as a result of the COVID-19 pandemic. As of September 30, 2021, no loans were on forbearance status for a forbearance granted from any prior date. Any forbearance granted out of COVID-19 was for six months or less.
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The Company will continue to monitor uncertainties caused by and developments of COVID-19.
Mergers and Acquisitions
From time to time we undertake acquisitions or similar transactions consistent with our Company’s operating and growth strategies. On August 2, 2021 Axos Clearing, LLC, acquired certain assets and liabilities of E*TRADE Advisor Services (“EAS”), rebranded Axos Advisors Services (“AAS”), the registered investment advisor custody business of Morgan Stanley. AAS adds incremental fee income, a turnkey technology platform used by independent registered investment advisors for trading and custody services, and low-cost deposits that can be used to generate fee income from other bank partners or to fund loan growth at Axos Bank. The initial purchase price of $54.6 million consists entirely of cash consideration paid upon acquisition and is pending final working capital adjustments.
The acquisition is accounted for as a business combination under the acquisition method of accounting. Accordingly, tangible and intangible assets acquired (and liabilities assumed) are recorded at their estimated fair values as of the date of acquisition. The Company allocated the purchase price to the tangible and intangible assets acquired based on information available through September 30, 2021. The Company’s accounting for the acquisition has not been finalized as the Company continues to evaluate the working capital adjustment, which is expected to have an immaterial effect on the value of the goodwill recognized. The allocation will be updated, if necessary, through the measurement period, which is no later than one year from the acquisition date.
Critical Accounting Policies
The following discussion and analysis of our financial condition and results of operations is based upon our unaudited condensed consolidated financial statements and the notes thereto, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these unaudited condensed consolidated financial statements requires us to make a number of estimates and assumptions that affect the reported amounts and disclosures in the unaudited condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions based upon historical experience and various factors and circumstances. We believe that our estimates and assumptions are reasonable under the circumstances. However, actual results may differ significantly from these estimates and assumptions that could have a material effect on the carrying value of assets and liabilities at the balance sheet dates and our results of operations for the reporting periods.
Our significant accounting policies and practices are described in greater detail in Note 1 - “Summary of Significant Accounting Policies” and under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies” contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended June 30, 2021.
USE OF NON-GAAP FINANCIAL MEASURES
In addition to the results presented in accordance with GAAP, this report includes non-GAAP financial measures such as adjusted earnings, adjusted earnings per common share, and tangible book value per common share. Non-GAAP financial measures have inherent limitations, may not be comparable to similarly titled measures used by other companies and are not audited. Readers should be aware of these limitations and should be cautious as to their reliance on such measures. Although we believe the non-GAAP financial measures disclosed in this report enhance investors’ understanding of our business and performance, these non-GAAP measures should not be considered in isolation, or as a substitute for GAAP basis financial measures.
We define “adjusted earnings”, a non-GAAP financial measure, as net income without the after-tax impact of non-recurring acquisition-related costs (including amortization of intangible assets related to acquisitions), and other costs (unusual or non-recurring charges). Adjusted earnings per diluted common share (“adjusted EPS”), a non-GAAP financial measure, is calculated by dividing non-GAAP adjusted earnings by the average number of diluted common shares outstanding during the period. We believe the non-GAAP measures of adjusted earnings and adjusted EPS provide useful information about the Bank’s operating performance. We believe excluding the non-recurring acquisition related costs, and other costs provides investors with an alternative understanding of Axos’ business without these non-recurring costs.
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Below is a reconciliation of net income, the nearest compatible GAAP measure, to adjusted earnings and adjusted EPS (Non-GAAP) for the periods shown:
Three Months Ended
September 30,
(Dollars in thousands, except per share amounts) 2021 2020
Net income $ 60,210  $ 53,022 
Acquisition-related costs
2,846  2,602 
Tax effects of adjustments (828) (783)
Adjusted earnings (Non-GAAP) $ 62,228  $ 54,841 
Adjusted EPS (Non-GAAP) $ 1.03  $ 0.91 

    We define “tangible book value”, a non-GAAP financial measure, as book value adjusted for goodwill and other intangible assets. Tangible book value is calculated using common stockholders’ equity minus mortgage servicing rights, goodwill and other intangible assets. Tangible book value per common share, a non-GAAP financial measure, is calculated by dividing tangible book value by the common shares outstanding at the end of the period. We believe tangible book value per common share is useful in evaluating the Company’s capital strength, financial condition, and ability to manage potential losses.
Below is a reconciliation of total stockholders’ equity, the nearest compatible GAAP measure, to tangible book value (Non-GAAP) as of the dates indicated:
September 30,
(Dollars in thousands) 2021 2020
Total stockholders’ equity $ 1,458,621  $ 1,236,965 
Less: preferred stock —  5,063 
Common stockholders’ equity 1,458,621  1,231,902 
Less: mortgage servicing rights, carried at fair value 18,438  12,130 
Less: goodwill and other intangible assets 164,944  122,817 
Tangible common stockholders’ equity (Non-GAAP) $ 1,275,239  $ 1,096,955 
Common shares outstanding at end of period 59,494,633  59,215,934 
Tangible book value per common share (Non-GAAP) $ 21.43  $ 18.52 
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SELECTED FINANCIAL DATA
The following tables set forth certain selected financial data concerning the periods indicated:
AXOS FINANCIAL, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands) September 30,
2021 		June 30,
2021 		September 30,
2020
Selected Balance Sheet Data:
Total assets $ 14,906,750  $ 14,265,565  $ 13,382,238 
Loans—net of allowance for credit losses 11,879,021  11,414,814  10,925,450 
Loans held for sale, carried at fair value 33,344  29,768  89,454 
Loans held for sale, lower of cost or fair value 11,949  12,294  14,729 
Allowance for credit losses - loans 136,778  132,958  132,915 
Securities—trading 1,941  1,983  423 
Securities—available-for-sale 135,996  187,335  203,931 
Securities borrowed 457,282  619,088  263,470 
Customer, broker-dealer and clearing receivables 427,169  369,815  283,125 
Total deposits 11,747,442  10,815,797  10,555,658 
Advances from the FHLB 157,500  353,500  242,500 
Borrowings, subordinated notes and debentures
255,896  221,358  453,843 
Securities loaned 539,505  728,988  315,976 
Customer, broker-dealer and clearing payables 510,040  535,425  369,428 
Total stockholders’ equity 1,458,621  1,400,936  1,236,965 
Capital Ratios:
Equity to assets at end of period 9.78  % 9.82  % 9.24  %
Axos Financial, Inc.:
Tier 1 leverage (core) capital to adjusted average assets 9.19  % 8.82  % 8.52  %
Common equity tier 1 capital (to risk-weighted assets) 10.79  % 11.36  % 11.08  %
Tier 1 capital (to risk-weighted assets) 10.79  % 11.36  % 11.13  %
Total capital (to risk-weighted assets) 13.10  % 13.78  % 14.39  %
Axos Bank:
Tier 1 leverage (core) capital to adjusted average assets 10.14  % 9.45  % 8.83  %
Common equity tier 1 capital (to risk-weighted assets) 11.89  % 12.28  % 11.52  %
Tier 1 capital (to risk-weighted assets) 11.89  % 12.28  % 11.52  %
Total capital (to risk-weighted assets) 12.80  % 13.21  % 12.55  %
Axos Clearing, LLC:
Net capital 39,663  35,950  34,322 
Excess capital 31,435  27,904  28,830 
Net capital as a percentage of aggregate debit items 9.64  % 8.94  % 12.50  %
Net capital in excess of 5% aggregate debit items 19,092  15,836  20,590 



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AXOS FINANCIAL, INC. AND SUBSIDIARIES
SELECTED CONSOLIDATED FINANCIAL INFORMATION
At or for the Three Months Ended
September 30,
(Dollars in thousands, except per share data) 2021 2020
Selected Income Statement Data:
Interest and dividend income $ 158,310  $ 149,889 
Interest expense 11,668  22,562 
Net interest income 146,642  127,327 
Provision for credit losses 4,000  11,800 
Net interest income after provision for credit losses 142,642  115,527 
Non-interest income 26,702  35,855 
Non-interest expense 84,431  75,546 
Income before income tax expense 84,913  75,836 
Income tax expense 24,703  22,814 
Net income $ 60,210  $ 53,022 
Net income attributable to common stock $ 60,210  $ 52,945 
Per Common Share Data:
Net income:
Basic $ 1.01  $ 0.89 
Diluted $ 0.99  $ 0.88 
Adjusted earnings (Non-GAAP)
$ 1.03  $ 0.91 
Book value $ 24.52  $ 20.80 
Tangible book value (Non-GAAP) $ 21.43  $ 18.52 
Weighted average number of common shares outstanding:
     Basic 59,390,846  59,509,320 
     Diluted 60,644,288  59,926,784 
Common shares outstanding at end of period 59,494,633  59,215,934 
Common shares issued at end of period 68,370,617  67,622,935 
Performance Ratios and Other Data:
Loan originations for investment $ 2,092,279  $ 1,330,812 
Loan originations for sale $ 209,967  $ 440,804 
Return on average assets 1.66  % 1.56  %
Return on average common stockholders’ equity 16.20  % 17.26  %
Interest rate spread1
4.04  % 3.62  %
Net interest margin2
4.22  % 3.84  %
Net interest margin2 – Banking Business Segment only
4.48  % 3.91  %
Efficiency ratio3
48.71  % 46.30  %
Efficiency ratio3 – Banking Business Segment only
39.93  % 39.95  %
Asset Quality Ratios:
Net annualized charge-offs to average loans 0.01  % 0.07  %
Non-performing loans to total loans 1.12  % 1.56  %
Non-performing assets to total assets 0.94  % 1.33  %
Allowance for credit losses - loans to total loans held for investment at end of period 1.14  % 1.20  %
Allowance for credit losses - loans to non-performing loans 101.97  % 77.23  %
1     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.
2    Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.
3 Efficiency ratio represents non-interest expense as a percentage of the aggregate of net interest income and non-interest income.
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RESULTS OF OPERATIONS
Comparison of the Three Months Ended September 30, 2021 and 2020
For the three months ended September 30, 2021, we had net income of $60.2 million compared to net income of $53.0 million for the three months ended September 30, 2020. Net income attributable to common stockholders was $60.2 million or $0.99 per diluted share for the three months ended September 30, 2021 compared to net income attributable to common stockholders of $52.9 million or $0.88 per diluted share for the three months ended September 30, 2020.
Adjusted earnings and adjusted EPS, non-GAAP measures, which exclude non-cash amortization expenses and non-recurring costs related to mergers and acquisitions expenses, increased 13.5% to $62.2 million and $1.03, for the quarter ended September 30, 2021 compared to $54.8 million and $0.91, respectively, for the quarter ended September 30, 2020.
Net Interest Income
Net interest income for the three months ended September 30, 2021 totaled $146.6 million, an increase of 15.2% compared to net interest income of $127.3 million for the three months ended September 30, 2020. The growth of net interest income for the three months ended September 30, 2021 compared to September 30, 2020 is primarily due to increased average earnings assets from net loan portfolio growth and reduced rates paid on interest-bearing demand and savings deposits and time deposits, partially offset by reduced yields on interest earning assets. During the three months ended September 30, 2021, non-interest bearing deposits increased $1,158.1 million, primarily from the deposits acquired through the acquisition of AAS.
Total interest and dividend income during the three months ended September 30, 2021 increased 5.6% to $158.3 million, compared to $149.9 million during the three months ended September 30, 2020. The increase in interest and dividend income for the three months ended September 30, 2021 was primarily attributable to the growth in average earning assets from loan originations and securities borrowed and margin lending, partially offset by reduced yields on loans and securities borrowed and margin lending. The average balance of loans and securities borrowed increased by 7.6% and 84.6%, respectively, for the three months ended September 30, 2021 compared to the three months ended September 30, 2020.
Total interest expense was $11.7 million for the three months ended September 30, 2021, a decrease of $10.9 million or 48.3% as compared with the quarter ended September 30, 2020. The decrease in the average cost of funds rate for the three months ended September 30, 2021 compared to 2020 was primarily due to a 30 basis point decrease in average rates paid on interest-bearing demand and savings deposits due to decreases in prevailing market deposit rates, an 81 basis point decrease in average rates paid on time deposits due to decreases in prevailing deposit rates across the industry and a 33.8% decrease in the average balance of time deposits. During the three months ended September 30, 2021, non-interest bearing deposits increased $1,158.1 million, primarily from the EAS acquisition replacing interest bearing deposits and borrowings.
Net interest margin, defined as annualized net interest income divided by average interest-earning assets, increased by 38 basis points to 4.22% for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. During the three months ended September 30, 2021, the primary contributors to the 38 basis point increase were the increase in non-interest bearing deposits of $1,158.1 million, primarily from the deposits acquired through the acquisition of AAS, along with a reduction in the level of low-yielding interest-earning deposits in other financial institutions.
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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
September 30,
2021 2020
(Dollars in thousands)
Average
Balance1
Interest
Income/
Expense
Average Yields
Earned/Rates
Paid2
Average
Balance1
Interest
Income/
Expense
Average Yields
Earned/Rates
Paid2
Assets:
Loans3, 4
$ 11,662,383  $ 149,176  5.12  % $ 10,842,218  $ 141,424  5.22  %
Interest-earning deposits in other financial institutions 1,163,143  591  0.20  % 1,706,582  507  0.12  %
Mortgage-backed and other investment securities4
156,360  1,421  3.64  % 189,631  2,677  5.65  %
Securities borrowed and margin lending5
903,542  6,851  3.03  % 489,565  5,077  4.15  %
Stock of the regulatory agencies 20,694  271  5.24  % 20,609  204  3.96  %
Total interest-earning assets 13,906,122  158,310  4.55  % 13,248,605  149,889  4.53  %
Non-interest-earning assets 596,295  362,957 
Total assets $ 14,502,417  $ 13,611,562 
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings $ 6,564,620  $ 3,567  0.22  % $ 7,052,323  $ 9,091  0.52  %
Time deposits 1,363,061  4,145  1.22  % 2,058,540  10,463  2.03  %
Securities loaned 660,040  251  0.15  % 302,601  124  0.16  %
Advances from the FHLB 295,402  1,016  1.38  % 242,500  1,372  2.26  %
Borrowings, subordinated notes and debentures 223,837  2,689  4.81  % 256,563  1,512  2.36  %
Total interest-bearing liabilities 9,106,960  11,668  0.51  % 9,912,527  22,562  0.91  %
Non-interest-bearing demand deposits 3,191,171  1,903,205 
Other non-interest-bearing liabilities 717,725  563,450 
Stockholders’ equity 1,486,561  1,232,380 
Total liabilities and stockholders’ equity $ 14,502,417  $ 13,611,562 
Net interest income $ 146,642  $ 127,327 
Interest rate spread6
4.04  % 3.62  %
Net interest margin7
4.22  % 3.84  %
1Average balances are obtained from daily data.
2Annualized.
3Loans include loans held for sale, loan premiums and unearned fees.
4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loan fee income is not significant. Loans include average balances of $26.7 million and $27.5 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2021 and 2020 three-month periods, respectively.
5Margin lending is the significant component of the asset titled customer, broker-dealer and clearing receivables on the unaudited condensed consolidated balance sheets.
6Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.
7Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.
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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); (ii) effects on interest income and interest expense attributable to changes in rate (changes in rate multiplied by prior volume). The change in interest due to both volume and rate has been allocated proportionally to both, based on their relative absolute values.
For the Three Months Ended
September 30,
2021 vs 2020
Increase (Decrease) Due to
(Dollars in thousands) Volume Rate Total
Increase
(Decrease)
Increase (decrease) in interest income:
Loans $ 10,512  $ (2,760) $ 7,752 
Interest-earning deposits in other financial institutions (193) 277  84 
Mortgage-backed and other investment securities (415) (841) (1,256)
Securities borrowed and margin lending 3,423  (1,649) 1,774 
Stock of the regulatory agencies 1  66  67 
$ 13,328  $ (4,907) $ 8,421 
Increase (decrease) in interest expense:
Interest-bearing demand and savings $ (591) $ (4,933) $ (5,524)
Time deposits (2,897) (3,421) (6,318)
Securities loaned 135  (8) 127 
Advances from the FHLB 256  (612) (356)
Borrowings, subordinated notes and debentures (215) 1,392  1,177 
$ (3,312) $ (7,582) $ (10,894)

Provision for Credit Losses
The provision for credit losses was $4.0 million for the three months ended September 30, 2021 compared to $11.8 million for the three months ended September 30, 2020. The decrease in the provision was primarily due to a $6.5 million additional reserve for non-recurring Refund Advance loans for the three months ended September 30, 2020, and favorable changes in economic and business conditions resulting from the reduced levels of COVID-19 infections between September 30, 2020 and September 30, 2021. Provisions for credit losses for the three months ended September 30, 2021 were primarily comprised of provisions in commercial real estate and consumer and auto due to growth in these segments of the loan portfolio, partially offset by a decrease in provisions for commercial and industrial - non-RE as a result of changes in loan mix in this loan portfolio segment. Provisions for credit losses are charged to income to bring the allowance for credit losses - loans to a level deemed appropriate by management based on the factors discussed under “Financial Condition—Asset Quality and Allowance for Credit Losses - Loans.”
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Non-Interest Income
The following table sets forth information regarding our non-interest income for the periods shown:
For the Three Months Ended
September 30,
(Dollars in thousands) 2021 2020 Inc (Dec)
Prepayment penalty fee income $ 2,986  $ 1,368  $ 1,618 
Gain on sale – other 17  334  (317)
Mortgage banking income 5,253  19,567  (14,314)
Broker-dealer fee income 11,766  5,702  6,064 
Banking and service fees 6,680  8,884  (2,204)
Total non-interest income $ 26,702  $ 35,855  $ (9,153)
Non-interest income decreased $9.2 million to $26.7 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The decrease was primarily the result of a decrease of $14.3 million in mortgage banking income, a decrease of $2.2 million in banking and service fees primarily due to Emerald Prepaid Mastercard® and Refund Transfer products associated with H&R Block that did not recur in the three months ended September 30, 2021, partially offset by an increase of $6.1 million in broker-dealer fee income driven by custody and mutual fund fees earned by the newly acquired AAS division and an increase of $1.6 million in prepayment penalty fee income.


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Non-Interest Expense
    The following table sets forth information regarding our non-interest expense for the periods shown:
For the Three Months Ended
September 30,
(Dollars in thousands) 2021 2020 Inc (Dec)
Salaries and related costs $ 40,737  $ 38,623  $ 2,114 
Data processing 12,092  7,928  4,164 
Advertising and promotional 3,372  2,556  816 
Depreciation and amortization 5,728  6,186  (458)
Professional services 4,545  5,999  (1,454)
Occupancy and equipment 3,181  3,011  170 
FDIC and regulator fees 2,266  2,692  (426)
Broker-dealer clearing charges 4,005  2,257  1,748 
Other general and administrative 8,505  6,294  2,211 
Total non-interest expenses
$ 84,431  $ 75,546  $ 8,885 
Non-interest expense, which is comprised of compensation, data processing, depreciation and amortization, advertising and promotional, professional services, occupancy and equipment, FDIC and regulator fees, broker-dealer clearing charges and other operating expenses, was $84.4 million for the three months ended September 30, 2021, up from $75.5 million for the three months ended September 30, 2020. The increase in non-interest expense for the three months ended September 30, 2021 was generally due to the addition of AAS and the expansion of the Company specifically in areas related to lending and deposits.
Total salaries and related costs increased $2.1 million to $40.7 million for the quarter ended September 30, 2021, compared to $38.6 million for the quarter ended September 30, 2020, due to increased staffing levels as a result of the AAS acquisition. Our staff increased to 1,282 from 1,108, or 15.7% between September 30, 2021 and September 30, 2020, which includes the addition of 124 employees for AAS.
Data processing expense increased $4.2 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020. The increase was primarily due to additions enhancements to customer interfaces and the Company’s core processing systems.
Depreciation and amortization expense decreased $0.5 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020. The decrease largely resulted from useful lives terminating on certain intangible assets acquired through acquisitions that reached the end of their useful lives as planned prior to the three months ended September 30, 2021.
Advertising and promotional expense increased $0.8 million for the three months ended September 30, 2021, compared to the three months ended September 30, 2020. The increase was primarily due to increased lead generation and deposit
marketing costs.
Professional services, which include accounting, consulting and legal fees, decreased $1.5 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The decrease is primarily the result of lower legal expenses.
Occupancy and equipment expense increased $0.2 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020, due to annual increases in our office space lease agreements and the addition of an assumed office space lease for our AAS employees.
The cost of our FDIC and OCC standard regulatory charges decreased $0.4 million for the three months ended September 30, 2021, compared to the three month period ending September 30, 2020 due to the changes in the Bank’s mix of liabilities used for the assessment. As an FDIC-insured institution, the Bank is required to pay deposit insurance premiums to the FDIC.
Broker-dealer clearing charges increased $1.7 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The increase was attributable to increased activity and correlated clearing charges in the Securities Business including the acquisition of AAS.
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Other general and administrative costs increased by $2.2 million for the three months ended September 30, 2021, compared to the three month period ended September 30, 2020 primarily related a $2.0 million provision to allowance for credit losses of unfunded commitments.
Provision for Income Taxes
Income tax expense was $24.7 million for the three months ended September 30, 2021 compared to $22.8 million for three months ended September 30, 2020. Our effective income tax rates (income tax provision divided by net income before income tax) for the three months ended September 30, 2021 and 2020 were 29.09% and 30.08%, respectively. The change in effective income tax rates between periods are primarily the result of changes in tax benefits from stock compensation.
SEGMENT RESULTS
Our Company determines reportable segments based on what separate financial information is available and what segment results are evaluated regularly by the Chief Executive Officer in deciding how to allocate resources and in assessing performance. Our Company operates through two segments: Banking Business and Securities Business. In order to reconcile the two segments to the unaudited condensed consolidated totals, our Company includes parent-only activities and intercompany eliminations. The following tables present the operating results of the segments:
Three Months Ended September 30, 2021
(Dollars in thousands) Banking
Business 		Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 142,241  $ 6,176  $ (1,775) $ 146,642 
Provision for credit losses 4,000  —  —  4,000 
Non-interest income 14,828  13,106  (1,232) 26,702 
Non-interest expense 62,725  19,273  2,433  84,431 
Income before taxes $ 90,344  $ 9  $ (5,440) $ 84,913 
Three Months Ended September 30, 2020
(Dollars in thousands) Banking
Business 		Securities Business Corporate/Eliminations Axos Consolidated
Net interest income $ 123,008  $ 4,894  $ (575) $ 127,327 
Provision for credit losses 11,800  —  —  11,800 
Non-interest income 30,212  5,784  (141) 35,855 
Non-interest expense 61,217  11,352  2,977  75,546 
Income before taxes $ 80,203  $ (674) $ (3,693) $ 75,836 
Banking Business
For the three months ended September 30, 2021, we had income before taxes of $90.3 million compared to income before taxes of $80.2 million for the three months ended September 30, 2020. For the three months ended September 30, 2021, the increase in income before taxes was related to increased net interest income due to an increase in average earning assets, a reduction in the rates paid on interest-bearing deposits, and a decrease in the provision for credit losses, partially offset by a decrease in non-interest income primarily driven by decreased mortgage banking income.
We consider the ratios shown in the table below to be key indicators of the performance of our Banking Business segment:
At or for the Three Months Ended
September 30, 2021 September 30, 2020
Efficiency ratio 39.93  % 39.95  %
Return on average assets 1.92  % 1.78  %
Interest rate spread 4.34  % 3.70  %
Net interest margin 4.48  % 3.91  %
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Our Banking segment’s net interest margin exceeds our consolidated net interest margin. Our consolidated net interest margin includes certain items that are not reflected in the calculation of our net interest margin within our Banking Business and reduce our consolidated net interest margin, such as the borrowing costs at our Holding Company and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities in our Securities Business, including items related to borrowings that particularly decrease net interest margin.
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
September 30,
  2021 2020
(Dollars in thousands)
Average
Balance1
Interest
Income/
Expense
Average Yields
Earned/Rates
Paid2
Average
Balance1
Interest
Income/
Expense
Average Yields
Earned/Rates
Paid2
Assets:
Loans3, 4
$ 11,622,074  $ 148,843  5.12  % $ 10,790,869  $ 140,678  5.21 %
Interest-earning deposits in other financial institutions 879,856  337  0.15  % 1,542,335  392  0.10 %
Mortgage-backed and other investment securities4
180,545  1,546  3.43  % 227,081  2,856  5.03 %
Stock of the regulatory agencies 17,824  270  6.06  % 17,250  203  4.71 %
Total interest-earning assets 12,700,299  150,996  4.76  % 12,577,535  144,129  4.58 %
Non-interest-earning assets 286,810  152,209 
Total assets $ 12,987,109  $ 12,729,744 
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings $ 6,614,799  $ 3,594  0.22  % $ 7,099,034  $ 9,155  0.52 %
Time deposits 1,363,061  4,145  1.22  % 2,058,540  10,463  2.03 %
Advances from the FHLB 295,402  1,016  1.38  % 242,500  1,372  2.26 %
Borrowings, subordinated notes and debentures
43  —  —  % 151,952  132  0.35 %
Total interest-bearing liabilities 8,273,305  8,755  0.42  % 9,552,026  21,122  0.88 %
Non-interest-bearing demand deposits 3,238,709  1,918,856 
Other non-interest-bearing liabilities 124,213  135,467 
Stockholders’ equity 1,350,882  1,123,395 
Total liabilities and stockholders’ equity $ 12,987,109  $ 12,729,744 
Net interest income $ 142,241  $ 123,007 
Interest rate spread5
4.34  % 3.70 %
Net interest margin6
4.48  % 3.91 %
1Average balances are obtained from daily data.
2Annualized.
3Loans include loans held for sale, loan premiums and unearned fees.
4Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loans include average balances of $26.7 million and $27.5 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2021 and 2020 three-month periods, respectively.
5Interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.
6Net interest margin represents annualized net interest income as a percentage of average interest-earning assets.


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Average Balances, Net Interest Income, Yields Earned and Rates Paid
The following table sets forth the effects of changing rates and volumes on our net interest income. 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); (ii) effects on interest income and interest expense attributable to changes in rate (changes in rate multiplied by prior volume). The change in interest due to both volume and rate has been allocated proportionally to both, based on their relative absolute values.
  For the Three Months Ended
September 30
2021 vs 2020
  Increase (Decrease) Due to
(Dollars in thousands) Volume Rate Total
Increase
(Decrease)
Increase / (decrease) in interest income:
Loans $ 10,636  $ (2,471) $ 8,165 
Interest-earning deposits in other financial institutions (204) 149  (55)
Mortgage-backed and other investment securities (513) (797) (1,310)
Stock of the regulatory agencies, at cost 7  60  67 
$ 9,926  $ (3,059) $ 6,867 
Increase / (decrease) in interest expense:
Interest-bearing demand and savings $ (588) $ (4,973) $ (5,561)
Time deposits (2,897) (3,421) (6,318)
Advances from the FHLB 256  (612) (356)
Borrowings, subordinated notes and debentures
(66) (66) (132)
$ (3,295) $ (9,072) $ (12,367)
The Banking segment’s net interest income for the three months ended September 30, 2021 totaled $142.2 million, an increase of 15.6%, compared to net interest income of $123.0 million for the three months ended September 30, 2020. The growth of net interest income for the three months ended September 30, 2021 is primarily due to an increase in average interest-earning assets and lowered funding costs from interest-bearing demand and savings deposits and time deposits.
The Banking segment’s non-interest income decreased $15.4 million from $30.2 million to $14.8 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The $15.4 million decrease in non-interest income for the three months ended September 30, 2021, was primarily the result of a decrease in mortgage banking income of $14.3 million and a decrease in banking and service fees of $2.2 million, partially offset by an increase in prepayment penalty fee income of $1.6 million.
The Banking segment’s non-interest expense increased $1.5 million for the three months ended September 30, 2021 compared to the three months ended September 30, 2020. For the three months ended September 30, 2021 compared to the three months ended September 30, 2020, the $1.5 million increase of non-interest expense was primarily due to an increase of $3.8 million for data processing, an increase in advertising and promotional expenses of $1.9 million, and an increase in other general and administrative costs of $1.7 million, partially offset by a decrease of $2.8 million for salaries and a decrease in professional services of $1.6 million.
Securities Business
For the three months ended September 30, 2021, our Securities Business segment had income before taxes of $9.0 thousand compared to a loss before taxes of $0.7 million for the three months ended September 30, 2020.
Net interest income for the three months ended September 30, 2021, increased $1.3 million to $6.2 million compared to $4.9 million for the three months ended September 30, 2020, primarily as a result of increase in the average interest-earning balance of securities borrowed and margin lending. In the Securities Business, interest is earned through margin loan balances, securities borrowed, and cash deposit balances. Interest expense is incurred from cash borrowed through bank lines and securities lending.
The non-interest income during the three months ended September 30, 2021, was $13.1 million compared to $5.8 million for the three months ended September 30, 2020. The increase of $7.3 million is the result of an increase of $5.3 million
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attributable to the addition of AAS custody and mutual funds fees, an increase of $0.8 million of clearing and custodial related fees, an increase of $0.6 million in correspondent fees, an increase of $0.5 million in fees earned on FDIC insured bank deposits, and an increase of $0.1 million of clearing technology services.
Non-interest expense increased $7.9 million to $19.3 million for the three months ended September 30, 2021 from the $11.4 million for the three months ended September 30, 2020. The increase was primarily related to an increase of $4.4 million in salaries and related expenses related to staffing and the acquisition of AAS, an increase of $1.7 million in broker-dealer clearing charges, an increase of $0.6 million in occupancy and equipment expense, and an increase of $0.4 million depreciation and amortization expense.
The following table provides selected information for Axos Clearing LLC as of or for the three months ended:
(Dollars in thousands) September 30, 2021 September 30, 2020
Compensation as a % of net revenue 43.8  % 40.1 %
FDIC insured deposit program balances at banks (end of period) $ 1,971,355  $ 672,822 
Customer margin balances (end of period) $ 340,995  $ 252,867 
Cash reserves for the benefit of customers (end of period) $ 269,358  $ 214,550 
Securities lending:
Interest-earning assets – stock borrowed (end of period) $ 457,282  $ 263,470 
Interest-bearing liabilities – stock loaned (end of period) $ 539,505  $ 315,976 
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FINANCIAL CONDITION
Balance Sheet Analysis
Our total assets increased $0.6 billion, or 4.5%, to $14.9 billion, as of September 30, 2021, up from $14.3 billion at June 30, 2021. The increase in total assets was primarily due to an increase of $464.2 million in loans. Total liabilities increased $0.6 billion, primarily from an increase in deposits of $931.6 million, partially offset by a decrease in securities loaned of $189.5 million.
Loans
Net loans held for investment increased 4.1% to $11.9 billion at September 30, 2021 from $11.4 billion at June 30, 2021. The increase in the loan portfolio was primarily due to loan originations of $2.1 billion, partially offset by loan repayments and other adjustments of $1.6 billion.
The following table sets forth the composition of the loan portfolio as of the dates indicated:
September 30, 2021 June 30, 2021
(Dollars in thousands) Amount Percent Amount Percent
Single Family - Mortgage & Warehouse $ 4,341,174  36.1  % $ 4,359,472  37.8  %
Multifamily and Commercial Mortgage 2,458,200  20.4  % 2,470,454  21.4  %
Commercial Real Estate 3,492,926  29.1  % 3,180,453  27.5  %
Commercial & Industrial - Non-RE 1,239,354  10.3  % 1,123,869  9.7  %
Auto & Consumer 446,656  3.7  % 362,180  3.1  %
Other 42,672  0.4  % 58,316  0.5  %
Total gross loans 12,020,982  100.0  % 11,554,744  100.0  %
Allowance for credit losses - loans (136,778) (132,958)
Unaccreted discounts and loan fees (5,183) (6,972)
Total net loans $ 11,879,021  $ 11,414,814 
The Bank originates some single family interest only loans with terms that include repayments that are less than the repayments for fully amortizing loans. The Bank’s lending guidelines for interest only loans are adjusted for the increased credit risk associated with these loans by requiring borrowers with such loans to borrow at LTVs that are lower than standard amortizing ARM loans and by calculating debt to income ratios for qualifying borrowers based upon a fully amortizing payment, not the interest only payment. The Bank monitors and performs reviews of interest only loans. Adverse trends reflected in the Company’s delinquency statistics, grading and classification of interest only loans would be reported to management and the Board of Directors. As of September 30, 2021, the Company had $1,076.9 million of interest only mortgage loans.
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Asset Quality and Allowance for Credit Losses - Loans
Non-performing Assets
Non-performing loans are comprised of loans past due 90 days or more on nonaccrual status and other nonaccrual loans. Non-performing assets include non-performing loans plus other real estate owned and repossessed vehicles. At September 30, 2021, our non-performing loans totaled $134.1 million, or 1.12% of total gross loans and our total non-performing assets totaled $140.5 million, or 0.94% of total assets.
Non-performing loans and foreclosed assets or “non-performing assets” consisted of the following as of the dates indicated:
(Dollars in thousands) September 30, 2021 June 30, 2021 Inc (Dec)
Non-performing assets:
Non-accrual loans:
Single Family - Mortgage & Warehouse $ 111,257  $ 105,708  $ 5,549 
Multifamily and Commercial Mortgage 6,964  20,428  (13,464)
Commercial Real Estate 15,539  15,839  (300)
Commercial & Industrial - Non-RE —  2,942  (2,942)
Auto & Consumer 374  278  96 
Total non-performing loans 134,134  145,195  (11,061)
Foreclosed real estate 6,114  6,547  (433)
Repossessed—Auto and RV 206  235  (29)
Total non-performing assets $ 140,454  $ 151,977  $ (11,523)
Total non-performing loans as a percentage of total loans 1.12  % 1.26  % (0.14) %
Total non-performing assets as a percentage of total assets 0.94  % 1.10  % (0.16) %
Total non-performing assets decreased from $152.0 million at June 30, 2021 to $140.5 million at September 30, 2021. The decrease in non-performing assets is primarily attributable to resolutions in multifamily and commercial mortgage loans. The Company ended forbearance for all single family mortgage borrowers during the quarter ended September 30, 2020. The weighted average LTV of the non-performing single family mortgage loans is 51.3%.
The Bank had no performing troubled debt restructurings at September 30, 2021 and June 30, 2021. A troubled debt restructuring is a concession made to a borrower experiencing financial difficulties, typically permanent or temporary modifications of principal and interest payments or an extension of maturity dates. When a loan is delinquent and classified as a troubled debt restructuring no interest is accrued until the borrower demonstrates over time (typically six months) that it can make payments. When a loan is considered a troubled debt restructuring and is on nonaccrual, it is considered non-performing and included in the table above.
Allowance for Credit Losses - Loans
On July 1, 2020, the Company adopted ASC 326. The update replaces the historical incurred loss model to a current expected loss model, resulting generally, in earlier recognition of loss. Refer to Note 1 - Summary of Significant Accounting Policies in our Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for further detail on the accounting adoption along with detail of the processes and approaches involved in determining the allowance for credit losses under the new guidance.
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The following table reflects management’s allocation of the allowance for credit losses - loans by loan category and the ratio of each loan category to total loans as of the dates indicated:
September 30, 2021 June 30, 2021
(Dollars in thousands) Amount
of
Allowance 		Allocation
as a % of
Allowance 		Amount
of
Allowance 		Allocation
as a % of
Allowance
Single Family Real Estate $ 25,329  18.5  % $ 26,604  20.0  %
Multifamily Real Estate 13,359  9.8  % 13,146  9.9  %
Commercial Real Estate 65,223  47.7  % 57,928  43.6  %
Commercial and Industrial - Non-RE 22,519  16.5  % 28,460  21.4  %
Consumer and Auto 10,007  7.3  % 6,519  4.9  %
Other 341  0.2  % 301  0.2  %
Total $ 136,778  100.0  % $ 132,958  100.0  %

The provision for credit losses was $4.0 million for the three months ended September 30, 2021 compared to $11.8 million for the three months ended September 30, 2020. The decrease in the provision was primarily due to a $6.5 million additional reserve for non-recurring Refund Advance loans for the three months ended September 30, 2020, and favorable changes in economic and business conditions resulting from the COVID-19 pandemic between September 30, 2020 and September 30, 2021. Provisions for credit losses for the three months ended September 30, 2021 were primarily comprised of provisions in commercial real estate and consumer and auto due to growth in these segments of the loan portfolio, partially offset by a decrease in provisions for commercial and industrial - non-RE as a result of changes in loan mix in this loan portfolio segment. We believe that the lower average LTV in the Bank’s mortgage loan portfolio will continue to result in future lower average mortgage loan charge-offs when compared to many other comparable banks. The resolution of the Bank’s existing other real estate owned and non-performing loans should not have a significant adverse impact on our operating results.
Investment Securities
Total investment securities were $137.9 million as of September 30, 2021, compared with $189.3 million at June 30, 2021. During the three months ended September 30, 2021, we purchased securities for $7.0 million, and received principal repayments of approximately $57.8 million in our available-for-sale portfolio. The remainder of the change for the available-for-sale portfolio is attributable to accretion and other activities.
Deposits
Deposits increased by $931.6 million, or 8.6%, to $11,747.4 million at September 30, 2021, from $10,815.8 million at June 30, 2021. Interest bearing deposits decreased $94.1 million and time deposits decreased $132.4 million as higher costing deposits were run off. Non-interest bearing deposits increased $1,158.1 million, or 46.8%, to $3,632.5 million at September 30, 2021, from $2,474.4 million at June 30, 2021, primarily due to deposits provided by the AAS acquisition.
The following table sets forth the composition of the deposit portfolio as of the dates indicated:
September 30, 2021 June 30, 2021
(Dollars in thousands) Amount
Rate1
Amount
Rate1
Non-interest bearing $ 3,632,521  —  % $ 2,474,424  —  %
Interest-bearing:
Demand 3,582,826  0.14  % 3,369,845  0.15  %
Savings 3,151,651  0.22  % 3,458,687  0.21  %
Total interest-bearing demand and savings 6,734,477  0.18  % 6,828,532  0.18  %
Time deposits:
$250 and under2
962,782  1.31  % 1,070,139  1.30  %
Greater than $250 417,662  0.54  % 442,702  1.03  %
Total time deposits
1,380,444  1.08  % 1,512,841  1.22  %
Total interest bearing2
8,114,921  0.33  % 8,341,373  0.37  %
Total deposits $ 11,747,442  0.23  % $ 10,815,797  0.29  %
1 Based on weighted-average stated interest rates at end of period.
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2 The total interest-bearing includes brokered deposits of $704.3 million and $621.4 million as of September 30, 2021 and June 30, 2021, respectively, of which $370.2 million and $380.0 million, respectively, are time deposits classified as $250 and under.

The following table sets forth the number of accounts by type as of the date indicated:
September 30, 2021 June 30, 2021 September 30, 2020
Non-interest bearing prepaid and other accounts 38,725  36,726  2,887,751 
Interest-bearing checking and savings accounts 342,860  336,068 314,774 
Time deposits 11,082  12,815 16,594 
Total number of accounts 392,667  385,609 3,219,119
Our non-interest bearing, prepaid and other accounts contained two omnibus accounts that when condensed for regulatory reporting purposes result in 29,317 accounts at September 30, 2020. The decrease in the number of accounts is the result of the termination of our third-party prepaid card relationships, such as H&R Block, due to the reduction of our interchange fees effective July 1, 2020 as a result of the Durbin Amendment.
Borrowings
The following table sets forth the composition of our borrowings and the interest rates at the dates indicated:
September 30, 2021 June 30, 2021 September 30, 2020
(Dollars in thousands) Balance Weighted Average Rate Balance Weighted Average Rate Balance Weighted Average Rate
FHLB Advances $ 157,500  2.29  % $ 353,500  1.18  % $ 242,500  2.22  %
Borrowings, subordinated notes and debentures 255,896  4.05  % 221,358  4.68 % 453,843  3.14  %
Total borrowings $ 413,396  3.38  % $ 574,858  0.73  % $ 696,343  2.82  %
Weighted average cost of borrowings during the quarter 2.85  % 2.93  % 2.30  %
Borrowings as a percent of total assets 2.77  % 4.03  % 5.20  %

At September 30, 2021, total borrowings amounted to $413.4 million, down $161.5 million or 28.09%, from June 30, 2021 and down $282.9 million or 40.63% from September 30, 2020. Borrowings as a percent of total assets were 2.8%, 4.0% and 5.2% at September 30, 2021, June 30, 2021 and September 30, 2020, respectively. Weighted average cost of borrowings during the quarter were 2.85%, 2.93% and 2.30% for the quarters ended September 30, 2021, June 30, 2021 and September 30, 2020, respectively.
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.
Stockholders’ Equity
Stockholders’ equity increased $57.7 million to $1,458.6 million at September 30, 2021 compared to $1,400.9 million at June 30, 2021. The increase was the result of our net income for the three months ended September 30, 2021 of $60.2 million, partially offset by stock compensation expense and restricted stock units vesting which combined for a decrease of $2.0 million and a $0.5 million decrease in other comprehensive income, net of tax.
During the three months ended September 30, 2021, the Company did not repurchase any common stock shares. The Company has $52.8 million remaining under the Board authorized stock repurchase program.
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LIQUIDITY
Cash flow information is as follows:
For the Three Months Ended
September 30,
(Dollars in thousands) 2021 2020
Operating Activities $ (133,441) $ 66,291 
Investing Activities $ (398,948) $ (316,103)
Financing Activities $ 764,046  $ (578,546)
During the three months ended September 30, 2021, we had net cash outflows from operating activities of $133.4 million compared to inflows of $66.3 million for the three months ended September 30, 2020, primarily due to net income for each period. 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 were the primary drivers.
Net cash outflows from investing activities totaled $398.9 million for the three months ended September 30, 2021, while outflows totaled $316.1 million for the three months ended September 30, 2020. The increase in outflows was primarily due to increased originations of loans partially offset by increased repayments on loans and the $54.6 million acquisition of AAS.
Net cash inflows from financing activities totaled $764.0 million for the three months ended September 30, 2021, compared to net cash outflows from financing activities of $578.5 million for the three months ended September 30, 2020. The primary driver behind the increase in net cash inflows was increased deposits provided by the acquisition of AAS for the three months ended September 30, 2021.
During the three months ended September 30, 2021, the Bank could borrow up to 40.0% of its total assets from the FHLB. Borrowings are collateralized by the pledge of certain mortgage loans and investment securities to the FHLB. At September 30, 2021, the Company had $1,709.3 million available immediately and $3,388.7 million available with additional collateral. At September 30, 2021, we also had two unsecured federal funds purchase lines with two different banks totaling $175.0 million, under which no borrowings were outstanding.
The Bank has the ability to borrow short-term from the Federal Reserve Bank of San Francisco Discount Window. At September 30, 2021, the Bank did not have any borrowings outstanding and the amount available from this source was $2,024.3 million. The credit line is collateralized by consumer loans and mortgage-backed securities.
Axos Clearing has a total of $99.4 million uncommitted secured lines of credit available for borrowing as needed. As of September 30, 2021, there was $70.6 million outstanding. These credit facilities bear interest at rates based on the Federal Funds rate and are due upon demand.
Axos Clearing has a $50 million committed unsecured line of credit available for limited purpose borrowing. As of September 30, 2021, there was $0 million outstanding. This credit facility bears interest at rates based on the Federal Funds rate and are due upon demand.
We believe our liquidity sources to be stable and adequate for our anticipated needs and contingencies for the next 12 months and beyond. We believe we have the ability to increase our level of deposits and borrowings to address our liquidity needs for the foreseeable future.
OFF-BALANCE SHEET COMMITMENTS
At September 30, 2021, we had commitments to originate loans with an aggregate outstanding principal balance of $1,068.7 million, and commitments to sell loans with an aggregate outstanding principal balance of $56.1 million. We have no commitments to purchase loans, investment securities or any other unused lines of credit.
In the normal course of business, Axos Clearing’s customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose Axos Clearing to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and Axos Clearing has to purchase or sell the financial instrument underlying the contract at a loss. Axos Clearing’s clearing agreements with broker-dealers for which it provides clearing services requires them to indemnify Axos Clearing if customers fail to satisfy their contractual obligation.
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CAPITAL RESOURCES AND REQUIREMENTS
Our Company and Bank are subject to regulatory capital adequacy requirements promulgated by federal bank regulatory agencies. Failure by our Company or Bank to meet minimum capital requirements could result in certain mandatory and discretionary actions by regulators that could have a material adverse effect on our unaudited condensed consolidated financial statements. The Federal Reserve establishes capital requirements for our Company and the OCC has similar requirements for our Bank. The following tables present regulatory capital information for our Company and Bank. Information presented for September 30, 2021, reflects the Basel III capital requirements that became effective January 1, 2015 for both our Company and Bank. Under these capital requirements and the regulatory framework for prompt corrective action, our Company and Bank must meet specific capital guidelines that involve quantitative measures of our Company and Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. Our Company’s and Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings and other factors.
Quantitative measures established by regulation require our Company and Bank to maintain certain minimum capital amounts and ratios. Federal bank regulators require our Company and Bank maintain minimum ratios of core capital to adjusted average assets of 4.0%, common equity tier 1 capital to risk-weighted assets of 4.5%, tier 1 capital to risk-weighted assets of 6.0% and total risk-based capital to risk-weighted assets of 8.0%. To be “well capitalized,” our Company and Bank must maintain minimum leverage, common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratios of at least 5.0%, 6.5%, 8.0% and 10.0%, respectively. At September 30, 2021, 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 September 30, 2021 that would materially adversely change the Company’s and Bank’s capital classifications. From time to time, we may need to raise additional capital to support our Company’s and Bank’s further growth and to maintain their “well capitalized” status.
The Company and Bank elected the CECL 5-year transition guidance for calculating regulatory capital ratios and the September 30, 2021 ratios include this election. This guidance allows an entity to add back to capital 100% of the capital impact from the day one CECL transition adjustment and 25% of subsequent increases to the allowance for credit losses through June 30, 2023. This cumulative amount will then be phased out of regulatory capital over the next three years.
The Company’s and Bank’s estimated capital amounts, capital ratios and capital requirements under Basel III were as follows:
Axos Financial, Inc. Axos Bank “Well 
Capitalized”
Ratio 		Minimum Capital
Ratio
(Dollars in millions) September 30, 2021 June 30,
2021 		September 30, 2021 June 30,
2021
Regulatory Capital:
Tier 1 $ 1,320  $ 1,309  $ 1,313  $ 1,263 
Common equity tier 1 $ 1,320  $ 1,309  $ 1,313  $ 1,263 
Total capital (to risk-weighted assets) $ 1,603  $ 1,588  $ 1,413  $ 1,358 
Assets:
Average adjusted $ 14,365  $ 14,851  $ 12,952  $ 13,360 
Total risk-weighted $ 12,231  $ 11,523  $ 11,043  $ 10,283 
Regulatory Capital Ratios:
Tier 1 leverage (core) capital to adjusted average assets 9.19  % 8.82  % 10.14  % 9.45  % 5.00  % 4.00  %
Common equity tier 1 capital (to risk-weighted assets) 10.79  % 11.36  % 11.89  % 12.28  % 6.50  % 4.50  %
Tier 1 capital (to risk-weighted assets) 10.79  % 11.36  % 11.89  % 12.28  % 8.00  % 6.00  %
Total capital (to risk-weighted assets) 13.10  % 13.78  % 12.80  % 13.21  % 10.00  % 8.00  %
Basel III implemented a requirement for all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively composed of common equity tier 1 capital, and it applies to each of the three risk-based capital ratios but not the leverage ratio. At September 30, 2021, our Company and Bank are in compliance with the capital conservation buffer requirement, which sets the common equity tier 1 risk-based, tier 1 risk-based and total risk-based capital ratio minimums to 7.0%, 8.5% and 10.5%, respectively.
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Securities Business
Pursuant to the net capital requirements of the Securities Exchange Act of 1934, as amended (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) September 30, 2021 June 30, 2021
Net capital $ 39,663  $ 35,950 
Excess Capital $ 31,435  $ 27,904 
Net capital as a percentage of aggregate debit items 9.64  % 8.94  %
Net capital in excess of 5% aggregate debit items $ 19,092  $ 15,836 
Axos Clearing as a clearing broker, is subject to SEC Customer Protection Rule (Rule 15c3-3 of the Exchange Act) which requires segregation of funds in a special reserve account for the benefit of customers. At September 30, 2021, the Company had a deposit requirement of $241.0 million and maintained a deposit of $214.3 million. On October 1, 2021, the company made a deposit of $31.0 million.
Certain broker-dealers have chosen to maintain brokerage customer accounts at Axos Clearing. To allow these broker-dealers to classify their assets held by the Company as allowable assets in their computation of net capital, the Company computes a separate reserve requirement for Proprietary Accounts of Brokers (PAB). At September 30, 2021, the Company had a deposit requirement of $47.8 million and maintained a deposit of $55.0 million. On October 1, 2021, the Company made a withdrawal in the amount of $6.9 million.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We measure interest rate sensitivity as the difference between amounts of interest-earning assets and interest-bearing liabilities that mature or contractually re-price within a given period of time. The difference, or the interest rate sensitivity gap, provides an indication of the extent to which an institution’s interest rate spread will be affected by changes in interest rates. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities and negative when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. In a rising interest rate environment, an institution with a positive gap would be in a better position than an institution with a negative gap to invest in higher yielding assets or to have its asset yields adjusted upward, which would cause the yield on its assets to increase at a faster pace than the cost of its interest-bearing liabilities. During a period of falling interest rates, however, an institution with a positive gap would tend to have its assets reprice at a faster rate than one with a negative gap, which would tend to reduce the growth in its net interest income.
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Banking Business
The following table sets forth the amounts of interest earning assets and interest bearing liabilities that were outstanding at September 30, 2021 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
September 30, 2021
(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 $ 966,301  $ —  $ —  $ —  $ 966,301 
Securities1
132,274  1,684  12,025  14,957  160,940 
Stock of the FHLB, at cost 17,250  —  —  —  17,250 
Loans—net of allowance for credit loss 7,618,288  1,504,579  2,806,303  46,635  11,975,805 
Loans held for sale 45,293  —  —  —  45,293 
Total interest-earning assets 8,779,406  1,506,263  2,818,328  61,592  13,165,589 
Non-interest earning assets —  —  —  —  306,080 
Total assets $ 8,779,406  $ 1,506,263  $ 2,818,328  $ 61,592  $ 13,471,669 
Interest-bearing liabilities:
Interest-bearing deposits $ 6,154,180  $ 1,513,649  $ 486,745  $ 171  $ 8,154,745 
Advances from the FHLB 5,000  40,000  52,500  60,000  157,500 
Borrowings, subordinated notes and debentures 126,088  —  —  14,000  140,088 
Total interest-bearing liabilities 6,285,268  1,553,649  539,245  74,171  8,452,333 
Other non-interest-bearing liabilities —  —  —  —  3,672,639 
Stockholders’ equity —  —  —  —  1,346,697 
Total liabilities and equity $ 6,285,268  $ 1,553,649  $ 539,245  $ 74,171  $ 13,471,669 
Net interest rate sensitivity gap $ 2,494,138  $ (47,386) $ 2,279,083  $ (12,579) $ 4,713,256 
Cumulative gap $ 2,494,138  $ 2,446,752  $ 4,725,835  $ 4,713,256  $ 4,713,256 
Net interest rate sensitivity gap—as a % of total interest earning assets 18.94  % (0.36) % 17.31  % (0.10) % 35.80  %
Cumulative gap—as % of total interest earning assets 18.94  % 18.58  % 35.90  % 35.80  % 35.80  %
1    Comprised of agency and non-agency mortgage-backed securities, municipal securities and other non-agency debt securities, which are classified as available-for-sale.
The above table provides an approximation of the projected re-pricing of assets and liabilities at September 30, 2021 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 historic experience.
Although “gap” analysis is a useful measurement device available to management in determining the existence of interest rate exposure, its static focus as of a particular date makes it necessary to utilize other techniques in measuring exposure to changes in interest rates. For example, gap analysis is limited in its ability to predict trends in future earnings and makes no 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 the Bank assumes no growth in the balance sheet other than for retained earnings:
As of September 30, 2021
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 $ 585,772  10.6  % $ 570,219  11.7  %
Base $ 529,586  —  % $ 510,581  —  %
Down 100 basis points $ 519,007  (2.0) % $ 492,226  (3.6) %
We attempt to measure the effect market interest rate changes will have on the net present value of assets and liabilities, which is defined as market value of equity. We analyze the market value of equity sensitivity to an immediate parallel and sustained shift in interest rates derived from the current treasury and LIBOR yield curves. For rising interest rate scenarios, the base market interest rate forecast was increased by 100, 200 and 300 basis points. For falling interest rate scenarios, we used a 100 basis point decrease due to limitations inherent in the current rate environment.
The following table indicates the sensitivity of market value of equity to the interest rate movement described above:
As of September 30, 2021
(Dollars in thousands) Net
Present Value 		Percentage Change from Base Net
Present
Value as a
Percentage
of Assets
Up 300 basis points $ 1,645,754  4.6  % 12.2  %
Up 200 basis points $ 1,670,166  6.2  % 12.3  %
Up 100 basis points $ 1,633,809  3.9  % 11.9  %
Base $ 1,572,806  —  % 11.4  %
Down 100 basis points $ 1,370,455  (12.9) % 9.8  %
The computation of the prospective effects of hypothetical interest rate changes is based on numerous assumptions, including relative levels of interest rates, asset prepayments, runoffs in deposits and changes in repricing levels of deposits to general market rates, and should not be relied upon as indicative of actual results. Furthermore, these computations do not take into account any actions that we may undertake in response to future changes in interest rates. Those actions include, but are not limited to, making change in loan and deposit interest rates and changes in our asset and liability mix.
Securities Business
Our Securities Business is exposed to market risk primarily due to its role as a financial intermediary in customer transactions, which may include purchases and sales of securities, securities lending activities, and in our trading activities, which are used to support sales, underwriting and other customer activities. We are subject to the risk of loss that may result from the potential change in value of a financial instrument as a result of fluctuations in interest rates, market prices, investor expectations and changes in credit ratings of the issuer.
Our Securities Business is exposed to interest rate risk as a result of maintaining inventories of interest rate sensitive financial instruments and other interest earning assets including customer and correspondent margin loans and securities borrowing activities. Our exposure to interest rate risk is also from our funding sources including customer and correspondent cash balances, bank borrowings and securities lending activities. Interest rates on customer and correspondent balances and securities produce a positive spread with rates generally fluctuating in parallel.
With respect to securities held, our interest rate risk is managed by setting and monitoring limits on the size and duration of positions and on the length of time securities can be held. Much 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.
At September 30, 2021, Axos Clearing held municipal obligations. These positions were classified as trading securities and had maturities greater than 10 years.
Our Securities Business is engaged in various brokerage and trading activities that expose us to credit risk arising from potential non-performance from counterparties, customers or issuers of securities. This risk is managed by setting and
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monitoring position limits for each counterparty, conducting periodic credit reviews of counterparties, reviewing concentrations of securities and conducting business through central clearing organizations.
Collateral underlying margin loans to customers and correspondents and with respect to securities lending activities is marked to market daily and additional collateral is required as necessary.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures About Market Risk.”

ITEM 4.CONTROLS AND PROCEDURES
The Company’s management, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer along with our Chief Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Management, including the Company’s Chief Executive Officer and Chief Financial Officer, does not expect that the Company’s internal controls will prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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PART II—OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS
The information set forth in Note 8 – “Commitments And Contingencies” to the Unaudited Condensed Consolidated Financial Statements is incorporated herein by reference.
In addition, from time to time we may be a party to other claims or litigation that arise in the ordinary course of business, such as claims to enforce liens, claims involving the origination and servicing of loans, and other issues related to the business of the Bank. None of such matters are expected to have a material adverse effect on the Company’s financial condition, results of operations or business.

ITEM 1A.RISK FACTORS
We face a variety of risks that are inherent in our business and our industry. These risks are described in more detail under Part 1, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2021. 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 shares retained in connection with net settlement of restricted stock awards during the quarter ended September 30, 2021.
(Dollars in thousands, except per share data) Number
of Shares
Purchased 		Average Price
Paid Per Shares 		Total Number of
Shares
Purchased as Part of Publicly  Announced
Plans or Programs 		Approximate Dollar value of
Shares that May
Yet be Purchased
Under the Plans
or Programs
Stock Repurchases1
Quarter Ended September 30, 2021
July 1, 2021 to July 31, 2021 —  $ —  —  $ — 
August 1, 2021 to August 31, 2021 —  $ —  —  $ — 
September 1, 2021 to September 30, 2021 —  $ —  —  $ — 
For the Three Months Ended September 30, 2021 —  $ —  —  $ 52,764 
Stock Retained in Net Settlement2
July 1, 2021 to July 31, 2021 12,729 
August 1, 2021 to August 31, 2021 82,797 
September 1, 2021 to September 30, 2021 29,081 
For the Three Months Ended September 30, 2021 124,607 
1 On March 17, 2016, the Board of Directors of the Company authorized a program to repurchase up to $100 million of common stock and extended the program by an additional $100 million on August 2, 2019. The share repurchase program will continue in effect until terminated by the Board of Directors of the Company. Purchases were made in open-market transactions.
2 In October 2021, the stockholders of the Company approved the amended and restated 2014 Stock Incentive Plan, which among other changes permitted net settlement of stock issuances related to equity awards for purposes of payment of a grantee’s minimum income tax obligation. Stock Retained in Net Settlement was at the vesting price of the associated restricted stock unit.


ITEM 3.    DEFAULTS UPON SENIOR SECURITIES
None.

ITEM 4.    MINE SAFETY DISCLOSURES
None.

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ITEM 5.    OTHER INFORMATION
    None.

ITEM 6.EXHIBITS
Exhibit
Number 		Description Incorporated By Reference to
10.1 Amendment to Offer Letter between Derrick K. Walsh and Axos Financial, Inc.
10.2 Change of Control Severance Agreement between Derrick K. Walsh and Axos Financial, Inc. and Axos Bank
10.3 Amended and Restated Employment Agreement between Andrew J. Micheletti and Axos Bank
31.1 Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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
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
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: October 28, 2021 By:     /s/ Gregory Garrabrants
Gregory Garrabrants
President and Chief Executive Officer
(Principal Executive Officer)
Dated: October 28, 2021 By:     /s/ Derrick K. Walsh
Derrick K. Walsh
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
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IMAGE_0A.JPG


September 23, 2021

Mr. Derrick K. Walsh

This letter is to confirm the terms of your employment at Axos Financial, Inc. (the “Company”) as EVP and Chief Financial Officer.

Your compensation plan includes the following components:

1.Base compensation: $300,000 per year, reviewed annually.

2.Initial one-time grant of 10,000 RSUs

3.Eligibility for a discretionary semi-annual incentive compensation plan, based upon your performance, payable in cash and/or share grants that may vest over time.

Your annual discretionary target bonus percentage is expected to be up to 250% for truly outstanding performance (payable in cash and/or share grants that may vest over time).

The Company has 26 pay periods per year with paychecks issued every other Thursday.

This is an exempt position. The purpose of this letter is only to confirm your compensation and is not an employment contract. The Company is an at-will employer, and neither you nor the Company is bound to continue the employment relationship if either chooses, at its will, to end the relationship at any time, subject to the terms of any other arrangements.

I believe you will continue to make important contributions to fulfilling the Company’s vision and look forward to working with you.

Sincerely,

/s/ Greg Garrabrants

Greg Garrabrants
President and CEO


Agreed/Accepted by:

______Derrick K. Walsh_______________                
    Print Name


______/s/ Derrick K. Walsh____________                    September 23, 2021
    Signature                                Date





Axos Financial, Inc. and Axos Bank

CHANGE OF CONTROL SEVERANCE AGREEMENT

This Change of Control Severance Agreement (the "Agreement") is made and entered into by and between Derrick Walsh ("Executive"), Axos Financial, Inc. (“Axos Financial”) and Axos Bank (the "Bank" together with Axos Financial, the “Company”), effective as of September 23, 2021 (the "Effective Date").
RECITALS

1.It is expected that Axos Financial, Inc. (the “Company) from time to time will consider the possibility of an acquisition by another company or other change of control. The Board of Directors of the Company (the "Board") recognizes that such consideration can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of a Change of Control of the Company.

2.The Board believes that it is in the best interests of the Company and its stockholders to provide Executive with an incentive to continue his or her employment and to motivate Executive to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.

3.The Board believes that it is imperative to provide Executive with certain severance benefits upon Executive's termination of employment following a Change of Control. These benefits will provide Executive with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

4.Certain capitalized terms used in the Agreement are defined in Section 5 below.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1.Term of Agreement. This Agreement will have an initial term commencing on the Effective Date and ending on December 31, 2024 (the "Initial Term"). Thereafter, this Agreement will renew automatically for an additional one (1) year term (the "Additional Term") unless either party provides the other party with written notice of non-renewal at least sixty (60) days prior to the date of automatic renewal. Notwithstanding the foregoing sentence, if a Change of Control occurs at any time during either the Initial Term or an Additional Term, the term of this Agreement will extend automatically through date that is thirty-six (36) months following the effective date of the Change of Control. If Executive becomes entitled to severance benefits under Section 3 during the term of this Agreement, the Agreement will not terminate until all of the obligations of the parties hereto with respect to this Agreement have been satisfied.



2.At-Will Employment. The Company and Executive acknowledge that Executive's employment is and will continue to be at-will, as defined under applicable law. If Executive's employment terminates for any reason, including (without limitation) any termination that occurs other than during the period that is on or within thirty-six (36) months after a Change of Control as provided herein, Executive will not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement or by the applicable stock incentive plans under which Executive has vested (collectively, the “Stock Plan”) and the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses.

3.Severance Benefits.

(a)Termination without Cause in Connection with a Change of Control. If the Company terminates Executive's employment with the Company without Cause and such termination occurs during the period that is on or within thirty-six (36) months after a Change of Control, and Executive signs and does not revoke a mutually agreeable bi-lateral release of claims, then Executive will receive the following from the Company:

(i)Accrued Compensation. The Company will pay Executive all accrued but unpaid vacation, expense reimbursements, wages, and other benefits due to Executive under any Company-provided plans, policies, and arrangements.

(ii)Severance Payment. Executive will receive a lump sum severance payment (less applicable withholding taxes) equal to 200% of Executive's annual base salary and target bonus as in effect immediately prior to Executive's termination date or (if greater) at the level in effect immediately prior to the Change of Control.
(iii)Equity Awards. Any outstanding unvested equity incentive awards shall become immediately and fully vested. In the event of any conflict between this agreement and another agreement, the terms of this agreement shall prevail for termination vesting purposes.

(iv)Continued Employee Benefits. If Executive elects continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") for Executive and Executive's eligible dependents, within the time period prescribed pursuant to COBRA, the Company will reimburse Executive for the COBRA premiums for such coverage (at the coverage levels in effect immediately prior to Executive's termination) until the earlier of (A) a period of twelve (12) months from the last date of employment of the Executive with the Company, or (B) the date upon which Executive and/or Executive's eligible dependents becomes covered under similar plans. COBRA reimbursements will be made by the Company to Executive consistent with the Company's normal expense reimbursement policy.

(b)Timing of Severance Payments. Unless otherwise required by Section 3(g), the Company will pay any severance payments in a lump sum as soon as practicable following Executive's termination date; provided, however, that no severance or other benefits will be paid or provided until the separation agreement and release of claims becomes effective, and any severance amounts or benefits otherwise payable between Executive's termination date and the date such release becomes effective will be paid on the effective date of such release. If Executive should die before all of the severance amounts


have been paid, such unpaid amounts will be paid in a lump-sum payment promptly following such event to Executive's designated beneficiary, if living, or otherwise to the personal representative of Executive's estate.

(c)Voluntary Resignation; Termination for Cause. If Executive's employment with the Company terminates (i) voluntarily by Executive or (ii) for Cause by the Company, then Executive will not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company's then existing severance and benefits plans and practices or pursuant to other written agreements with the Company.

(d)Disability; Death. If the Company terminates Executive's employment as a result of Executive’s Disability, or Executive's employment terminates due to his or her death, then Executive’s estate will only be entitled to receive a lump sum severance payment (less applicable withholding taxes) equal to 100% of Executive's annual base salary as in effect immediately prior to Executive's date of death or disability, 100% vesting of any unvested stock awards (e.g., restricted stock units, options, etc…) and the Executive’s annual target cash bonus, in addition to those (if any) as may then be established under the Company's then existing written severance and benefits plans and practices, its applicable Stock Plan or pursuant to other written agreements with the Company.

(e)Termination not in Connection with a Change of Control or for Cause. In the event Executive's employment is terminated for any reason other than as provided in Section 3(a) or 3(c) then Executive will be entitled only to receive the following from the Company:

(i) Accrued Compensation. The Company will pay Executive all accrued but unpaid vacation, expense reimbursements, wages, and other benefits due to Executive under any Company-provided plans, policies, and arrangements.

(ii)Equity Awards. Any outstanding unvested equity incentive awards shall become immediately and fully vested; and

(iii)Severance. Severance as may be provided in the sole discretion of the Chief Executive Officer of the Company.

(f)Exclusive Remedy. In the event of a termination of Executive's employment as set forth in Section 3(a), the provisions of Section 3 are intended to be and are exclusive and in lieu of any other rights or remedies to which Executive or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement (other than the payment of accrued but unpaid wages, as required by law, and any unreimbursed reimbursable expenses). If Executive is terminated consistent with Section 3(a) hereof, Executive shall not be entitled to benefits, compensation or other payments or rights upon termination of employment for the Company’s convenience or following a Change of Control other than those benefits expressly set forth in this Section 3. In consideration of the Company’s promises in this Agreement, to the fullest extent permitted by applicable law, Executive hereby waives any other rights or remedies against the Company, its affiliates and subsidiaries, and their respective officers, directors and employees (collectively, the “Axos Parties”). In consideration of the Company’s promises in this Agreement, to the fullest extent permitted by applicable law, Executive waives and releases any claims or potential claims against the Axos Parties existing as of Executive’s


execution and delivery of this Agreement, including without limitation, (i) any claim, existing as of Executive’s execution and delivery of this Agreement, in relation to this Agreement or the negotiation and execution hereof and (ii) any claim, in existence as of the date of Executive’s execution and delivery of this Agreement, not known to the Executive upon execution and delivery of this Agreement (it being understood that this provision includes a waiver of the provisions of California Civil Code Section 1542 regarding a release of unknown claims). For the avoidance of doubt, this Section 3(f) shall not be construed to limit any applicable right of indemnification from the Company to which Executive may be entitled for good faith actions taken in the course and scope of Executive’s employment for the Company; however, this Agreement does not create any right of indemnification from the Company.


(g)Section 409A.

(i)Notwithstanding anything to the contrary in this Agreement, if Executive is a "specified employee" within the meaning of Section 409A of the Code and the final regulations and any guidance promulgated thereunder ("Section 409A") at the time of Executive's termination (other than due to death), and the severance payable to Executive, if any, pursuant to this Agreement, when considered together with any other severance payments or separation benefits that are considered deferred compensation under Section 409A (together, the "Deferred Compensation Separation Benefits") that are payable within the first six (6) months following Executive's termination of employment, will become payable on the first payroll date that occurs on or after the date six (6) months and one (1) day following the date of Executive's termination of employment. All subsequent Deferred Compensation Separation Benefits, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. Notwithstanding anything herein to the contrary, if Executive dies following his termination but prior to the six (6) month anniversary of his termination, then any payments delayed in accordance with this paragraph will be payable in a lump sum as soon as administratively practicable after the date of Executive's death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit. Each payment and benefit payable under this Agreement is intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.

(ii)Any amount paid under the Agreement that satisfies the requirements of the "short-term deferral" rule set forth in Section 1.409A-1(b)(4) of the Treasury Regulations shall not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(iii)Amount paid under the Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that do not exceed the Section 409A Limit shall not constitute Deferred Compensation Separation Benefits for purposes of clause (i) above.

(iv)The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. The Company and Executive agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or


desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

4.Limitation on Payments. In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (i) constitute "parachute payments" within the meaning of Section 280G of the Code, and (ii) but for this Section 4, would be subject to the excise tax imposed by Section 4999 of the Code, then Executive's severance benefits under Section 3(a) will be either:

(a)delivered in full, or

(b)delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits may be taxable under Section 4999 of the Code. Unless the Company and Executive otherwise agree in writing, any determination required under this Section 4 will be made in writing by the Company's independent public accountants immediately prior to a Change of Control or such other person or entity to which the parties mutually agree (the "Accountants"), whose determination will be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 4, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and Executive will furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company will bear all costs the Accountants may incur in connection with any calculations contemplated by this Section 4.

5.Definition of Terms. The following terms referred to in this Agreement will have the following meanings:

(a)Cause. "Cause" will mean:

(i)Executive's continued intentional and demonstrable failure to perform his or her duties customarily associated with Executive's position as an employee of the Company or its respective successors or assigns, as applicable (other than any such failure resulting from Executive's mental or physical Disability) after Executive has received a written demand of performance from the Company with specifically sets forth the factual basis for the Company's belief that Executive has not devoted sufficient time and effort to the performance of his or her duties and has failed to cure such non- performance within thirty (30) days after receiving such notice (it being understood that if Executive is in good-faith performing his or her duties, but is not achieving results the Company deems satisfactory for Executive's position, it will not be considered to be grounds for termination of Executive for "Cause");

(ii)Executive's conviction of, or plea of nolo contendere to, a felony that the Board reasonably believes has had or will have a material detrimental effect on the Company's reputation or business; or



(iii)Executive's commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against, and causing material harm to, the Company or its respective successors or assigns, as applicable.

If and only if Executive is terminated as provided in Section 3(c) hereof, Executive will receive notice and an opportunity to be heard before the Board with Executive's own attorney before any termination for Cause is deemed effective. Notwithstanding anything to the contrary, the Board may immediately place Executive on administrative leave (with full pay and benefits to the extent legally permissible) but will allow reasonable access to Company information, employees and business should Executive wish to avail himself and prepare for his or her opportunity to be heard before the Board prior to the Board's termination for Cause. If Executive avails himself of his or her opportunity to be heard before the Board, and then fails to make himself or herself available to the Board within thirty (30) days of such request to be heard, the Board may thereafter cancel the administrative leave and terminate Executive for Cause. Likewise, if the Board fails to make itself available to Executive and his or her counsel within thirty (30) days of Executive's request to be heard, Executive will be entitled to terminate his or her employment with the Company and such termination will be treated as a resignation by Executive for Good Reason (“Good Reason,” being used in this Agreement as such term is construed under Section 409A of the Code). For the avoidance of doubt, the benefits to the Executive of this paragraph apply only to a termination for Cause related to a Change of Control as provided in Section 3(a), or a termination for Cause as provided in Section 3(c), and do not apply to any other circumstance.

(b)Change of Control. "Change of Control" will mean the occurrence of any of the
following events:

(i)Change in Ownership of the Company. A change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group ("Person"), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of the Company, except that any change in the ownership of the stock of the Company as a result of a private financing of the Company that is approved by the Board will not be considered a Change of Control; or

(ii)Change in Effective Control of the Company. A change in the effective control of the Company which occurs (a) on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election or (b) on the date that the Chief Executive Officer of the Company as of the date of the signing of this Agreement ceases to be the Chief Executive Officer of the Company.

(iii)Change in Ownership of a Substantial Portion of the Company's Assets. A change in the ownership of a substantial portion of the Company's assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions. For purposes of this subsection (iii), gross fair


market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

Notwithstanding the foregoing provisions of this definition, an event will not be deemed a Change of Control if the current Chief Executive Officer of the Bank as of the date of the signing of this Agreement determines to terminate the employment of Executive prior to the Change of Control provided that such termination is not in reasonable anticipation of a Change of Control.

(c)Disability. "Disability" will mean that the Employee has been unable to perform his or her Company duties as the result of his or her incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement or 180 days in any consecutive twelve
(12) month period, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to Executive or Executive's legal representative (such agreement as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least thirty (30) days' written notice by the Company of its intention to terminate the Employee's employment. In the event that the Employee resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate will automatically be deemed to have been revoked.

(d)Section 409A Limit. "Section 409A Limit" will mean the lesser of two (2) times: (i) Executive's annualized compensation based upon the annual rate of pay paid to Executive during the Executive's taxable year preceding the Executive's taxable year of Executive's termination of employment as determined under, and with such adjustments as are set forth in, Treasury Regulation 1.409A-1(b)(9) (iii)(A)(1) and any Internal Revenue Service guidance issued with respect thereto; or (ii) the maximum amount that may be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code for the year in which Executive's employment is terminated.

6.Successors.
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(a)The Company's Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) or to all or substantially all of the Company's business and/or assets will assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term "Company" will include any successor to the Company's business and/or assets which executes and delivers the assumption agreement described in this Section 6(a) or which becomes bound by the terms of this Agreement by operation of law.

(b)Executive's Successors. The terms of this Agreement and all rights of Executive hereunder will inure to the benefit of, and be enforceable by, Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

7.Arbitration.
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(a)The Company and Executive each agree that any and all disputes arising out of the terms of this Agreement, Executive's employment by the Company, Executive’s service as an officer or director of the Company, or Executive’s compensation and benefits, their interpretation and any of the matters herein released, will be subject to binding arbitration under the arbitration rules set forth in California Code of Civil Procedure Sections 1280 through 1294.2, including Section 1281.8 (the "Act"), and pursuant to California law. Disputes that the Company and Executive agree to arbitrate, and thereby agree to waive any right to a trial by jury, include any statutory claims under local, state, or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes-Oxley Act, the Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the California Family Rights Act, the California Labor Code, claims of harassment, discrimination, and wrongful termination, and any statutory or common law claims. The Company and Executive further understand that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.

(b)Procedure. The Company and Executive agree that any arbitration will be administered by Judicial Arbitration & Mediation Services, Inc. ("JAMS"), pursuant to its Employment Arbitration Rules & Procedures (the "JAMS Rules"). The Arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication, motions to dismiss and demurrers, and motions for class certification, prior to any arbitration hearing. The Arbitrator will have the power to award any remedies available under applicable law, and the Arbitrator will award attorneys' fees and costs to the prevailing party, except as prohibited by law. The Company will pay for any administrative or hearing fees charged by the Arbitrator or JAMS except that Executive will pay any filing fees associated with any arbitration that Executive initiates, but only so much of the filing fees as Executive would have instead paid had he or she filed a complaint in a court of law. The Arbitrator will administer and conduct any arbitration in accordance with the laws internal to the state of California, including the California Code of Civil Procedure, and the Arbitrator will apply substantive and procedural law internal to the state of California to any dispute or claim; however, substantive federal law shall be applied to the extent it preempts California law. To the extent that the JAMS Rules conflict with California law, California law will take precedence, except to the extent preempted by applicable federal law, which shall then apply. The decision of the Arbitrator will be in writing. Any arbitration under this Agreement will be conducted in San Diego, California. Arbitration awards may be enforced in any court having jurisdiction over the party, and the party seeking to enforce the award shall be entitled to recover all enforcement costs, including, without limitation, attorney’s fees, from the other party.

(c)Remedy and Waiver of Jury Trial. Except as provided by the Act and this Agreement, arbitration will be the sole, exclusive, and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Act and this Agreement, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. This arbitration election constitutes a waiver of a jury trial by Executive and Company with respect to all claims arising under or related to this Agreement.



(d)Administrative Relief. Executive understand that nothing in this Agreement restricts him or her from pursuing any administrative claim with a local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to a claim or report an Executive may bring in good faith. Such agencies include, but are not limited to those related to employment, such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, the National Labor Relations Board, or the Workers' Compensation Board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim, except as permitted by law.

(e)Voluntary Nature of Agreement. Each of the Company and Executive acknowledges and agrees that such party is executing this Agreement voluntarily and without any duress or undue influence by anyone. Executive further acknowledges and agrees that he or she has carefully read this Agreement and has asked any questions needed for him or her to understand the terms, consequences, and binding effect of this Agreement and fully understand it, including that Executive is waiving his or her right to a jury trial. Executive also represents to the Company that, consistent with Executive being hired in a senior-level role, Executive is accustomed to, and experienced in reviewing and understanding contracts, including, without limitation, those with complex business terms. Executive further agrees that he or she has been provided an opportunity to seek the advice of an attorney of his or her choice before signing this Agreement. Executive acknowledges that availing him or herself of the benefits of this Agreement, including, without limitation, accepting payments pursuant to Section 3 hereof, shall constitute a conclusive and final election of remedies on the part of Executive.

8.Notice.

(a)General. Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when personally delivered or when mailed by
U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices will be addressed to him or her at the home address which he or she most recently communicated to the Company in writing (e.g., the Executive address on file with the Company for payroll purposes). In the case of the Company, mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its President and CEO.

9.Miscellaneous Provisions.

(a)No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.

(b)Other Requirements. Executive's receipt of any payments or benefits under Section 3 will be subject to Executive continuing to comply with the terms of any confidential information agreement executed by Executive in favor of the Company and the provisions of this Agreement.

(c)Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by the


CEO of the Company. No waiver by either party of any breach of, or compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(d)Headings. All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(e)Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. For the avoidance of doubt, this Agreement shall not be deemed to supersede or affect any benefit entitlements vested as of the date of the Executive's termination of employment pursuant to written terms of any Company employee benefit plan, including, without limitation the Company’s Executive Retiree Medical Plan .

(f)Choice of Law and Interpretation. The validity, interpretation, construction and performance of this Agreement will be governed by the laws internal to the State of California, except to the extent preempted by applicable federal law. Any claims or legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether or not arising under this Agreement) shall be commenced in any state or federal court sitting in San Diego County, California, and the parties irrevocably accept and submit to the personal jurisdiction of and venue of such courts. Executive acknowledges that the Company has not duty to act in the Executive’s best interest, and that this Agreement, consistent with the recitals hereto, is intended to serve the Company’s best interests and shall be construed in this manner in the case of ambiguity.

(g)Severability. The invalidity or unenforceability of any provision or provisions of this Agreement will not affect the validity or enforceability of any other provision hereof, which will remain in full force and effect. If any part of this Agreement is deemed invalid or unenforceable, this Agreement shall be construed, to the fullest extent permitted by law, to give meaning and effect to such provisions to construe them in a manner deemed valid and enforceable.

(h)Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income, employment and other taxes.

(i)Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

(j)Amendment. This Agreement may be amended only in a writing signed by the Executive and the Company’s Chief Executive Officer, stating its intent to expressly amend provisions of this Agreement (it being understood that an exchange of emails shall not be deemed sufficient to amend this Agreement).

(k)Binding Effect. Executive and Company represent that this Agreement creates a binding obligation on the parties.


[Signature page follows.]


IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.


COMPANY    Axos Financial, Inc. and Axos Bank

IMAGE_2.JPG By:    /s/ Gregory Garrabrants

Title:    Gregory Garrabrants, President and CEO

Date:    September 23, 2021


EXECUTIVE    By:    /s/ Derrick K. Walsh
Name:    Derrick K. Walsh
Title:     EVP, Chief Financial Officer
Date:    September 23, 2021


AMENDED AND RESTATED EMPLOYMENT AGREEMENT

        This Amended and Restated Employment Agreement (the “Agreement”) is entered into as of September 23, 2021 (the “Effective Date”), by and between Axos Bank, a federal savings bank (“Bank’) and Andrew Micheletti (“Executive”) Bank and Executive are sometimes collectively referred to in this Agreement as the “Parties.” As used in this Agreement, the term “Effective Date” means the date this Amended and Restated Employment Agreement becomes effective.

Recitals
    A.    Bank and Executive entered into that certain First Amended Employment Agreement (the “First Agreement”) dated April 22, 2010 and wish to amend and restate such employment relationship in this Agreement.

    B.    Bank desires to continue to employ Executive and avail itself of his skill, knowledge and experience in the management of Bank’s business.

    B.    The Parties desire to set forth in this Agreement the continuing terms of Executive’s employment by Bank.

        The Parties therefore agree as follows:

    A.    TERM OF EMPLOYMENT

1.Term. Bank employs Executive to perform the duties described in this Agreement, and Executive accepts such employment, for a term of three years commencing on the Effective Date and ending on the day preceding the three year anniversary of the Effective Date (the “Term”), except this Agreement may be terminated prior to the end of the Term by Bank or Employee in accordance with and subject to the terms of Paragraph F. (Termination) of this Agreement.
    B.    DUTIES OF EXECUTIVE

        Subject to the direction of the Chief Executive Officer of the Bank (the “CEO”), Executive shall perform the duties ascribed to the Executive and shall have the title of Executive Vice President, Finance (or as modified from time-to-time by the CEO). During the Term, Executive shall perform exclusively for the Bank, Axos Financial, (or the “Bank’s Affiliates” as assigned by CEO) the services contemplated in this Agreement, faithfully, diligently and to the best of Executive’s ability, consistent with the highest and best standards of the banking industry and in compliance with all applicable laws and regulations and the Bank’s federal stock charter and bylaws. Except as permitted by the prior written consent of the CEO, Executive shall devote Executive’s entire working time, ability and attention to the business of the Bank and the Bank’s Affiliates, including Axos Financial, Inc. (the “Company”) during the Term.

    C.    COMPENSATION



        1.    Base Salary. In consideration of Executive’s services to be performed under this Agreement, Bank shall pay or cause to be paid to Executive a base salary of $350,000 per annum payable in equal installments in conformity with Bank’s normal payroll periods.
        
2.    Cash Bonus. Executive shall be eligible to receive a discretionary cash bonus award with an annual target bonus of 100 percent (100%) of Executive’s then current annual Base Salary payable semi-annually in conformity with the Bank’s normal bonus periods. The cash bonus awards may be increased to a level above the annual target of 100% or decreased to a level between 100% and 0% of annual target.
    D.    EXECUTIVE BENEFITS

        1.    Vacation. Executive shall be entitled to vacation as prescribed in the Bank’s Employee Manual maintained on the Bank’s Intranet. In the event this Agreement is terminated pursuant to Paragraph F.2, Bank reserves the right to require Executive to take any unused vacation time prior to the Date of Termination (as defined in Paragraph F.2).

        2.    Directors and Officers Liability Insurance. Bank shall provide for Executive, at Bank’s expense, coverage under a directors and officers liability insurance policy in such amounts and on such terms as may be approved by Bank’s board of directors and as may be consistent with such coverage provided by the Bank and the Bank’s Affiliates for its other officers and directors. The Bank and the Company shall maintain any existing officer Indemnification Agreement with the Executive during the term of this Agreement, and as provided in Paragraph G.2 of this Agreement.

        3.    Group Insurance Benefits; and Death Benefit. Executive shall participate in all group insurance plans provided by Bank for all of its senior executive officers at Bank’s expense to the same extent and on the same terms as Bank’s other senior executive officers. Throughout the term of employment, the Bank shall, at its sole cost, provide a death benefit on the life of Executive in an amount equal to two times Executive’s then-current annual salary.

        4.    Restricted Stock. As of Effective Date, all restricted stock unit grants representing shares of Axos Financial, Inc. (“RSUs”) previously issued to Executive before the date of this Agreement, shall continue to vest in accordance with the original terms of each grant and the remaining three year vesting periods; provided, however, that such vesting shall be accelerated and all RSUs held by Executive that are unvested at the time of termination shall vest, and settle not later than sixty (60) days following the date the (i) the Executive is terminated by Bank for any reason in this Agreement except for those causes provided in Paragraph F.1. (a), (b), (c) and (e) of this Agreement , (ii) Executive’s employment terminates due to his death or disability, or (iii) upon a Change of Control (as defined below). Executive shall no longer be eligible for equity-based compensation, including RSUs, other than those unvested RSUs granted prior to the date of this Agreement.

        5.    Change of Control. “Change of Control” will mean the occurrence of any of the following events:

(i)Change in Ownership of Axos Financial, Inc. (the “Company”). A change in the ownership of the Company which occurs on the date that
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any one person, or more than one person acting as a group (“Person”), acquires ownership of the stock of the Company that, together with the stock held by such Person, constitutes more than 50% of the total voting power of the stock of the Company, except that any change in the ownership of the stock of the Company as a result of a private financing of the Company that is approved by the board of directors of the Company (the “Board”) will not be considered a Change of Control;
(ii)Change in Effective Control of the Company. A change in the effective control of the Company which occurs (a) on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election or (b) on the date that the CEO as of the date of this Agreement, ceases to be the chief executive officer of the Bank or the Company; or
(iii)Change in Ownership of a Substantial Portion of the Company’s Assets. A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 50% of the total gross fair market value of all the assets of the Company immediately prior to such acquisition or acquisitions. For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

        6.    Retirement, Profit Sharing and Other Plans. Executive shall be entitled to participate in any retirement plans, salary deferral and other deferred compensation plans, medical expense reimbursement plans and other similar plans that the Bank may establish with respect to all employees; provided, however, that nothing herein shall require Bank to establish or maintain any of such plans.

        7.    First Agreement. For the avoidance of doubt, nothing in this Agreement shall modify the terms of compensation payable under the First Agreement for the fiscal year period ended June 30, 2021.

    E.    BUSINESS EXPENSES AND REIMBURSEMENT

        1.    Business Expenses. Bank shall pay or reimburse Executive for any ordinary and necessary business expenses incurred by Executive in the performance of his duties and in acting for or on behalf of Bank during the Term, provided that: (a) each such expenditure is of a nature qualifying it as a proper deduction on the federal and state income tax returns of Bank as a business expense and not as deductible compensation to Executive, (b) Executive furnishes to Bank adequate records and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authorities for the substantiation of such expenditures and deductible business expenses of Bank, and (c) Executive’s expense reimbursement reports are submitted for approval in accordance with Bank’s internal policies.
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    F.    TERMINATION

        1.    Termination for Cause. Bank may terminate this Agreement for cause at any time without advance notice (unless noted otherwise in Paragraph F.1.) and without further obligation or liability to Executive, by action of the CEO:

            (a)    Executive’s continued intentional and demonstrated failure to perform his duties customarily associated with Executive’s position as an employee of the Company or its respective successors or assigns, as applicable, after Executive has received a written demand of performance from the Company that specifically sets forth the factual basis for the Company’s belief that Executive has not devoted sufficient time and effort to the performance of his duties and has failed to cure such non-performance within thirty (30) days after receiving such notice (it being understood that if Executive is in good-faith performing his or her duties, but is not achieving results the Company deems satisfactory for Executive’s position, it will not be considered to be grounds for termination of Executive “for cause”;

            (b)    Executive’s conviction of, or plea of nolo contendere to, a felony that the CEO reasonably believes has had or will have a material detrimental effect on the Company’s reputation or business; or ;

            (c)    Executive’s commission of an act of fraud, embezzlement, misappropriation, willful misconduct, or breach of fiduciary duty against, and causing material hardship to, the Bank or the Company or their respective successors or assigns, as applicable;

            (d)    If Executive dies or is found to be physically or mentally incapable of performing Executive’s duties for a consecutive period of ninety (90) days or greater by the CEO, reasonably and in good faith. Termination pursuant to disability under this subparagraph (d) shall become effective immediately on written notice of termination given by Bank to Executive after the expiration of such 90-day period; or

            (e)    If Bank is closed by the bank regulatory authorities or taken over by any of the bank regulatory authorities having jurisdiction over Bank’s activities.

        2.    Termination at Will. Notwithstanding anything to the contrary contained in this Agreement, this Agreement may be terminated by either party at any time upon thirty (30) days’ written notice of termination to the other Party (“Notice of Termination”). As used in this Paragraph F.2, “Date of Termination” means the thirtieth (30th) day following the date on which Notice of Termination is given.

            (a)    Termination by Bank. In the event Bank (or its successor) elects to terminate this Agreement at Will or as a result of death or disability (as provided under Paragraph F. 1. (d) of this Agreement) prior to the expiration of the Term, Executive shall be entitled to his normal compensation (including accelerated vesting of RSUs as provided for in Paragraph D.4. and other vested benefits provided in Paragraph D.6.) plus additional cash severance from the Bank as follows: If the Date
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of Termination is within twelve (12) months of the date of this Agreement, Bank shall pay to Executive a cash severance payment equal to $175,000 on the Date of Termination. If the Date of Termination is after twelve (12) months and before 24 months after the date of this Agreement, Bank shall pay a cash severance payment equal to $87,500 on the Date of Termination. If the Executive is terminated 24 months or more after the date of this Agreement, Bank shall not pay Executive a cash severance payment. Furthermore, if Executive is terminated as a result of death as provided in Paragraph F. 1. (d) of this Agreement, the estate of the Executive shall be paid the life insurance proceeds as a benefit under Paragraph D. 3. of this Agreement.

            (b)    Termination by Executive. In the event Executive elects to terminate this Agreement by giving Notice of Termination prior to the expiration of the Term, Executive shall be entitled to such compensation as may be due and payable to him through and including such Date of Termination, but Executive shall not be entitled to any other additional compensation (except as may be required by law or by written agreement, including this Agreement) and shall not be entitled to acceleration of his unvested RSUs as provided for in Paragraph D.4. of this Agreement.

        3.    Effect of Termination. In the event of the termination of this Agreement prior to the completion of the Term for any of the reasons specified in Paragraphs F.1 (excluding subparagraph (d)) and F.2 (b), Executive shall be entitled to his compensation earned by Executive prior to the Date of Termination, as provided in this Agreement, computed pro rata up to and including the Date of Termination, but Executive shall not be entitled to any further compensation or other benefits for services rendered after the Date of Termination, except as otherwise set forth in this Agreement. As used in this Paragraph F.3. “Date of Termination” includes the effective date of any termination, whether pursuant to Paragraph F.1 or F.2.

    G.    GENERAL PROVISIONS

        1.    Solicitation of Customers and Employees. For any period during which Executive receives any salary from Bank and for a one-year period following any termination of Executive from Bank, Executive shall not solicit any customers or employees of Bank to move their banking or employment relationships from Bank. Nothing in this Agreement shall preclude Executive from any mass solicitation to groups and individual follow-up solicitations of persons or businesses named in any list or data base not specifically related to or previously defined by the Bank, even though the names of certain Bank customers may appear in such list or data base.

        2.    Indemnification. To the maximum extent permitted by law, the Bank and the Company shall indemnify the Executive and advance all defense costs and pay all expenses incurred by Executive in connection with the defense or settlement of, and shall pay and satisfy any judgments, awards, fines and penalties rendered, assessed or levied against Executive in, any judicial, arbitration, mediation or administrative suit, action, hearing, inquiry or proceeding (whether or not Bank or Company is joined as a party) relating to any acts or omissions of Executive alleged to have occurred (i) on behalf of the Bank, the Company or as a fiduciary of a benefit plan, or (ii) by Bank or Company or benefit plan. The Bank or Company shall not be obligated to defend, indemnify or hold Executive harmless from the consequences of his own negligent or reckless act or omission or willful misconduct or dishonesty as determined in a court of law. In addition, to the maximum extent permitted by law, Bank shall advance to Executive, upon receipt of the undertaking required by California Corporations Code Section 317(f) (and other statues), any expenses incurred in defending against any such proceeding to which Executive is a
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party or has been threatened to be made a party. This Paragraph G. 2. shall in all events survive any termination of this Agreement.

        3.    Return of Property. Executive expressly agrees that all manuals, documents, files, reports, studies, instruments, equipment and other materials and property used and/or developed by Bank or Executive (whether on his personal time or while performing services for the Bank) during the Term (“Preparatory Work”) are the sole property of Bank, and that Executive has no right, title or interest in such property. Executive further agrees that, subject to the execution of this Agreement, all Preparatory Work is the sole property of Bank, and that Executive has no right, title or interest, legal or beneficial, in such Preparatory Work or in any benefits that may arise from such Preparatory Work. Upon termination of this Agreement for any reason, Executive or Executive’s representative shall promptly deliver possession of all of said property to Bank in original or good, operating condition, normal wear and tear excepted.

        4.    Notices.
Notices and all other communications contemplated by this Agreement will be in writing and will be deemed to have been duly given when personally delivered or when mailed by U.S. registered or certified mail, return receipt requested and postage prepaid. In the case of Executive, mailed notices will be addressed to him or her at the home address which he or she most recently communicated to the Company in writing (e.g., the Executive address on file with the Company for payroll purposes). In the case of the Company, mailed notices will be addressed to its corporate headquarters, and all notices will be directed to the attention of its President and CEO.

        5.    Benefit of Agreement; Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective executors, administrators, successors and assigns. This Agreement is for the personal services of Executive and may not be assigned by Executive.

        .
        6.    Captions and Paragraphs Headings. Captions and paragraph headings used herein are for convenience only and are not a part of this Agreement and shall not be used in constructing it.

        7.    Invalid Provisions. Should any provision of this Agreement for any reason be declared invalid, void, or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portion shall not be affected, and the remaining portions of this Agreement shall remain in full force and effect as if this Agreement had been executed with the said provision eliminated.

        8.    Entire Agreement. This Agreement contains the entire agreement of the Parties. It supersedes any and all other agreements or understandings, whether oral or written, between the Parties with respect to the employment of Executive by Bank. The terms of this Agreement in Paragraph D.4 applicable to restricted stock supersede the terms of the Plan or any agreement between the Parties to the extent the terms of the Plan and any other agreement are inconsistent with the terms of Paragraph D.4. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, oral or otherwise, have been made by any party, or anyone acting on behalf of any party, that are not embodied in this Agreement, and that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding. Additionally, terms of this Agreement will prevail in any conflicts with other agreements.

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        9.    Attorney’s Fees. Each party shall bear his or its own attorneys’ fees and costs incurred in connection with the negotiation, preparation and delivery of this Agreement. However, if any action is instituted to enforce or interpret any of the obligations set forth in this Agreement, the prevailing party(ies) shall be entitled to recover its (their) reasonable attorneys’ fees and costs incurred in connection with the enforcement or interpretive action.

        10.    Trade Secrets. To the extent that during the Term, Bank develops any trade secrets, as that term is defined under California law, the Parties agree that such trade secrets belong to and are the property of the Bank. Executive agrees that for a period of one (1) year after the termination of this Agreement, Executive shall not disclose any of Bank’s trade secrets, directly or indirectly, or use them in any way in contravention of the rights of the Bank to such trade secrets.

        11.    Arbitration.

(a)The Company and Executive each agree that any and all disputes arising out of the terms of this Agreement, Executive's employment by the Company, Executive’s service as an officer or director of the Company, or Executive’s compensation and benefits, their interpretation and any of the matters herein released, will be subject to binding arbitration under the arbitration rules set forth in California Code of Civil Procedure Sections 1280 through 1294.2, including Section 1281.8 (the "Act"), and pursuant to California law. Disputes that the Company and Executive agree to arbitrate, and thereby agree to waive any right to a trial by jury, include any statutory claims under local, state, or federal law, including, but not limited to, claims under Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990, the Age Discrimination in Employment Act of 1967, the Older Workers Benefit Protection Act, the Sarbanes-Oxley Act, the Worker Adjustment and Retraining Notification Act, the California Fair Employment and Housing Act, the Family and Medical Leave Act, the California Family Rights Act, the California Labor Code, claims of harassment, discrimination, and wrongful termination, and any statutory or common law claims. The Company and Executive further understand that this Agreement to arbitrate also applies to any disputes that the Company may have with Executive.
(b) Procedure. The Company and Executive agree that any arbitration will be administered by Judicial Arbitration & Mediation Services, Inc. ("JAMS"), pursuant to its Employment Arbitration Rules & Procedures (the "JAMS Rules"). The Arbitrator will have the power to decide any motions brought by any party to the arbitration, including motions for summary judgment and/or adjudication, motions to dismiss and demurrers, and motions for class certification, prior to any arbitration hearing. The Arbitrator will have the power to award any remedies available under applicable law, and the Arbitrator will award attorneys' fees and costs to the prevailing party, except as prohibited by law. The Company will pay for any administrative or hearing fees charged by the Arbitrator or JAMS except that Executive will pay any filing fees associated with any arbitration that Executive initiates, but only so much of the filing fees as Executive would have instead paid had he or she filed a complaint in a court of law. The Arbitrator will administer and conduct any arbitration in accordance with the laws internal to the state of
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California, including the California Code of Civil Procedure, and the Arbitrator will apply substantive and procedural law internal to the state of California to any dispute or claim; however, substantive federal law shall be applied to the extent it preempts California law. To the extent that the JAMS Rules conflict with California law, California law will take precedence, except to the extent preempted by applicable federal law, which shall then apply. The decision of the Arbitrator will be in writing. Any arbitration under this Agreement will be conducted in San Diego, California. Arbitration awards may be enforced in any court having jurisdiction over the party, and the party seeking to enforce the award shall be entitled to recover all enforcement costs, including, without limitation, attorney’s fees, from the other party.
(c)Remedy and Waiver of Jury Trial. Except as provided by the Act and this Agreement, arbitration will be the sole, exclusive, and final remedy for any dispute between Executive and the Company. Accordingly, except as provided for by the Act and this Agreement, neither Executive nor the Company will be permitted to pursue court action regarding claims that are subject to arbitration. This arbitration election constitutes a waiver of a jury trial by Executive and Company with respect to all claims arising under or related to this Agreement.
(d)Administrative Relief. Executive understand that nothing in this Agreement restricts him or her from pursuing any administrative claim with a local, state, or federal administrative body or government agency that is authorized to enforce or administer laws related to a claim or report an Executive may bring in good faith. Such agencies include, but are not limited to those related to employment, such as the Department of Fair Employment and Housing, the Equal Employment Opportunity Commission, the National Labor Relations Board, or the Workers' Compensation Board. This Agreement does, however, preclude Executive from pursuing court action regarding any such claim, except as permitted by law.
(e)Voluntary Nature of Agreement. Each of the Company and Executive acknowledges and agrees that such party is executing this Agreement voluntarily and without any duress or undue influence by anyone. Executive further acknowledges and agrees that he or she has carefully read this Agreement and has asked any questions needed for him or her to understand the terms, consequences, and binding effect of this Agreement and fully understand it, including that Executive is waiving his or her right to a jury trial. Executive also represents to the Company that, consistent with Executive being hired in a senior-level role, Executive is accustomed to, and experienced in reviewing and understanding contracts, including, without limitation, those with complex business terms. Executive further agrees that he or she has been provided an opportunity to seek the advice of an attorney of his or her choice before signing this Agreement. Executive acknowledges that availing him or herself of the benefits of this Agreement, including, without limitation, accepting payments pursuant to Section 3 hereof, shall constitute a conclusive and final election of remedies on the part of Executive.

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        12.    Miscellaneous Provisions.

(a)No Duty to Mitigate. Executive will not be required to mitigate the amount of any payment contemplated by this Agreement, nor will any such payment be reduced by any earnings that Executive may receive from any other source.
(b)Other Requirements. Executive's receipt of any payments or benefits under Paragraph G.2(a) will be subject to Executive continuing to comply with the terms of any confidential information agreement executed by Executive in favor of the Company and the provisions of this Agreement.
(c)Waiver. No provision of this Agreement will be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by the CEO of the Company. No waiver by either party of any breach of, or compliance with, any condition or provision of this Agreement by the other party will be considered a waiver of any other condition or provision or of the same condition or provision at another time.
(d)Choice of Law and Interpretation. The validity, interpretation, construction and performance of this Agreement will be governed by the laws internal to the State of California, except to the extent preempted by applicable federal law. Any claims or legal actions by one party against the other arising out of the relationship between the parties contemplated herein (whether or not arising under this Agreement) shall be commenced in any state or federal court sitting in San Diego County, California, and the parties irrevocably accept and submit to the personal jurisdiction of and venue of such courts. Executive acknowledges that the Company has no duty to act in the Executive’s best interest, and that this Agreement, consistent with the recitals hereto, is intended to serve the Company’s best interests and shall be construed in this manner in the case of ambiguity.
(e)Withholding. All payments made pursuant to this Agreement will be subject to withholding of applicable income, employment and other taxes.
(f)Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.
(g)Amendment. This Agreement may be amended only in a writing signed by the Executive and the Company’s Chief Executive Officer, stating its intent to expressly amend provisions of this Agreement (it being understood that an exchange of emails shall not be deemed sufficient to amend this Agreement).
(h)Binding Effect. Executive and Company represent that this Agreement creates a binding obligation on the parties.


[Signature page follows.]


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The Parties execute this Agreement as of the Effective Date first above written.


EXECUTIVE:                    Axos Bank
                        a federal savings bank

By: /s/ Andrew J. Micheletti        By: /s/ Gregory Garrabrants
Name:Andrew Micheletti            Name: Gregory Garrabrants
Title: EVP, Finance                Title: President and Chief Executive Officer

                        

                        

Consent of Axos Financial, Inc.


    By execution of this Agreement below, Axos Financial, Inc., a Delaware corporation, consents to and agrees to perform its obligations under the Agreement.

Axos Financial, Inc.


By:/s/ Gregory Garrabrants    
    
Gregory Garrabrants, President and Chief Executive Officer                        


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Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory Garrabrants, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Axos Financial, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: October 28, 2021   /s/ GREGORY GARRABRANTS
   
GREGORY GARRABRANTS
President and Chief Executive Officer (Principal Executive Officer)


Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Derrick K. Walsh, certify that:
1.I have reviewed this quarterly report on Form 10-Q of Axos Financial, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d -15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.     The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Dated: October 28, 2021   /s/ DERRICK K. WALSH
   
DERRICK K. WALSH
Executive Vice President and Chief Financial Officer (Principal Financial Officer)


Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Axos Financial, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Gregory Garrabrants, hereby certify in my capacity as President and Chief Executive Officer of the Company, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
a)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
b)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such Report.
Dated: October 28, 2021   /s/ GREGORY GARRABRANTS
   
GREGORY GARRABRANTS
President and Chief Executive Officer (Principal Executive Officer)


Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Axos Financial, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof, I, Derrick K. Walsh, hereby certify in my capacity as Executive Vice President and Chief Financial Officer of the Company, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002 that:
a)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
b)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods presented in the financial statements included in such Report.

Dated: October 28, 2021   /s/ DERRICK K. WALSH
    
DERRICK K. WALSH
Executive Vice President and Chief Financial Officer (Principal Financial Officer)