Axos Financial, Inc. - FORM 8-K - EX-99.2 - EXHIBIT 99.2

Attached files

file	filename
8-K - 8-K - Axos Financial, Inc.	a8-k20200630pressrelea.htm
EX-99.1 - EXHIBIT 99.1 - Axos Financial, Inc.	pressrelease20200630ax.htm

AXOS FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited)

	At June 30,
(Dollars in thousands, except par and stated value)	2020			2019
ASSETS
Cash and due from banks	$	1,756,477		$	511,125
Cash segregated for regulatory purposes	194,042			346,143
Federal funds sold	—			100
Total cash, cash equivalents, cash segregated, and federal funds sold	1,950,519			857,368
Securities:
Trading	105			—
Available for sale	187,627			227,513
Stock of regulatory agencies	20,610			20,276
Loans held for sale, carried at fair value	51,995			33,260
Loans held for sale, lower of cost or fair value	44,565			4,800
Loans and leases—net of allowance of $75,807 as of June 2020 and $57,085 as of June 2019	10,631,349			9,382,124
Mortgage servicing rights, carried at fair value	10,675			9,784
Other real estate owned and repossessed vehicles	6,408			7,485
Securities borrowed	222,368			144,706
Customer, broker-dealer and clearing receivables	220,266			203,192
Goodwill and other intangible assets—net	125,389			134,893
Other assets	380,024			194,837
TOTAL ASSETS	$	13,851,900		$	11,220,238

LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Non-interest bearing	$	1,936,661		$	1,441,930
Interest bearing	9,400,033			7,541,243
Total deposits	11,336,694			8,983,173
Advances from the Federal Home Loan Bank	242,500			458,500
Borrowings, subordinated notes and debentures	235,789			168,929
Securities loaned	255,945			198,356
Customer, broker-dealer and clearing payables	347,614			238,604
Accounts payable and accrued liabilities and other liabilities	202,512			99,626
Total liabilities	12,621,054			10,147,188
STOCKHOLDERS’ EQUITY:
Preferred stock—$0.01 par value; 1,000,000 shares authorized;
Series A—$10,000 stated value and liquidation preference per share; 515 shares issued and outstanding as of June 2020 and June 2019	5,063			5,063
Common stock—$0.01 par value; 150,000,000 shares authorized, 67,323,053 shares issued and 59,612,635 shares outstanding as of June 2020, 66,563,922 shares issued and 61,128,817 shares outstanding as of June 2019	673			666
Additional paid-in capital	411,873			389,945
Accumulated other comprehensive income (loss)—net of tax	(937		)	16
Retained earnings	1,009,299			826,170
Treasury stock, at cost; 7,710,418 shares as of June 2020 and 5,435,105 shares as of June 2019	(195,125		)	(148,810		)
Total stockholders’ equity	1,230,846			1,073,050
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	13,851,900		$	11,220,238

S-1

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



	For the Quarters Ended June 30,
(Dollars in thousands, except earnings per share)	2020		2019
INTEREST AND DIVIDEND INCOME:
Loans and leases, including fees	$	137,194	$	128,268
Securities borrowed and customer receivables	3,560		4,776
Investments	3,389		8,599
Total interest and dividend income	144,143		141,643
INTEREST EXPENSE:
Deposits	23,942		32,695
Advances from the Federal Home Loan Bank	1,777		5,986
Securities loaned	115		376
Other borrowings	1,037		2,149
Total interest expense	26,871		41,206
Net interest income	117,272		100,437
Provision for loan and lease losses	6,500		2,800
Net interest income, after provision for loan and lease losses	110,772		97,637
NON-INTEREST INCOME:
Realized gain (loss) on sale of securities	—		842
Prepayment penalty fee income	1,169		1,774
Gain on sale - other	517		549
Mortgage banking income	12,673		2,308
Broker-dealer fee income	5,670		6,701
Banking and service fees	8,673		11,050
Total non-interest income	28,702		23,224
NON-INTEREST EXPENSE:
Salaries and related costs	37,409		33,909
Data processing	8,887		7,358
Depreciation and amortization	6,982		5,123
Advertising and promotional	2,803		3,445
Occupancy and equipment	3,180		2,588
Professional services	3,163		3,427
Broker-dealer clearing charges	2,162		1,727
FDIC and regulatory fees	2,395		2,418
General and administrative expense	4,563		5,541
Total non-interest expense	71,544		65,536
INCOME BEFORE INCOME TAXES	67,930		55,325
INCOME TAXES	22,630		14,691
NET INCOME	$	45,300	$	40,634
NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	45,223	$	40,557
COMPREHENSIVE INCOME	$	47,089	$	41,168
Basic earnings per share	$	0.76	$	0.66
Diluted earnings per share	$	0.75	$	0.66

S-2

AXOS FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Year Ended June 30,
(Dollars in thousands, except earnings per share)	2020		2019			2018
INTEREST AND DIVIDEND INCOME:
Loans and leases, including fees	$	582,748	$	525,317		$	446,991
Securities borrowed and customer receivables	16,585		8,746			—
Investments	23,506		30,824			28,083
Total interest and dividend income	622,839		564,887			475,074
INTEREST EXPENSE:
Deposits	126,916		117,080			79,851
Advances from the Federal Home Loan Bank	11,988		32,834			22,848
Securities loaned	679		748			—
Other borrowings	5,645		5,620			3,881
Total interest expense	145,228		156,282			106,580
Net interest income	477,611		408,605			368,494
Provision for loan and lease losses	42,200		27,350			25,800
Net interest income, after provision for loan and lease losses	435,411		381,255			342,694
NON-INTEREST INCOME:
Realized gain (loss) on sale of securities	—		709			(18		)
Other-than-temporary loss on securities:
Other-than-temporary loss on securities:	—		(1,666		)	(6,271		)
Less: Portion of other temporary impairment losses recognized in OCI	—		845			6,115
Change to net impairment losses recognized in earnings on securities	—		(821		)	(156		)
Prepayment penalty fee income	5,993		5,851			3,862
Gain on sale - other	6,871		6,160			5,734
Mortgage banking income	20,646		5,267			13,755
Broker-dealer fee income	23,210		11,737			—
Banking and service fees	46,267		53,854			47,764
Total non-interest income	102,987		82,757			70,941
NON-INTEREST EXPENSE:
Salaries and related costs	144,341		127,433			100,975
Data processing	30,671		24,150			17,400
Depreciation and amortization	24,443		16,471			8,574
Advertising and promotional	14,523		14,710			15,500
Occupancy and equipment	12,059		8,571			6,063
Professional services	11,095		11,916			5,280
Broker-dealer clearing charges	8,210		2,822			—
FDIC and regulatory fees	5,538		9,005			4,860
General and administrative expense	24,886		36,128			15,284
Total non-interest expense	275,766		251,206			173,936
INCOME BEFORE INCOME TAXES	262,632		212,806			239,699
INCOME TAXES	79,194		57,675			87,288
NET INCOME	$	183,438	$	155,131		$	152,411
NET INCOME ATTRIBUTABLE TO COMMON STOCK	$	183,129	$	154,822		$	152,102
COMPREHENSIVE INCOME	$	182,485	$	155,760		$	151,311
Basic earnings per share	$	3.01	$	2.50		$	2.41
Diluted earnings per share	$	2.98	$	2.48		$	2.37

S-3

AXOS FINANCIAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)



	Year Ended June 30,
(Dollars in thousands)	2020			2019			2018
NET INCOME	$	183,438		$	155,131		$	152,411
Net unrealized gain (loss) from available-for-sale securities, net of tax expense (benefit) of $(381), $562, and $(2,449) for the years ended June 30, 2020, 2019 and 2018, respectively.	(953		)	1,741			(5,493		)
Other-than-temporary impairment on securities sold, reclassified in other comprehensive income, net of tax expense (benefit) of $0, $(251), and $1,918 for the years ended June 30, 2020, 2019 and 2018, respectively.	—			(594		)	4,197
Reclassification of net (gain) loss from available-for-sale securities included in income, net of tax expense (benefit) of $0, $191, and $(104) for the years ended June 30, 2020, 2019, and 2018, respectively.	—			(518		)	196
Other comprehensive income (loss)	$	(953	)	$	629		$	(1,100	)
Comprehensive income	$	182,485		$	155,760		$	151,311

S-4

AXOS FINANCIAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Unaudited)

	Preferred Stock			Common Stock							Additional Paid-in Capital		Retained Earnings			Accumulated Other Comprehensive Income (Loss), Net of Income Tax			Treasury Stock			Total
				Number of Shares
(Dollars in thousands)	Shares	Amount		Issued	Treasury		Outstanding		Amount
Balance as of June 30, 2017	515	$	5,063	65,115,932	(1,579,688	)	63,536,244		$	651	$	346,117	$	519,246		$	487		$	(37,317	)	$	834,247
Net income	—	—		—	—		—		—		—		152,411			—			—			152,411
Other comprehensive income (loss)	—	—		—	—		—		—		—		—			(1,100		)	—			(1,100		)
Cash dividends on preferred stock	—	—		—	—		—		—		—		(309		)	—			—			(309		)
Purchase of treasury stock	—	—		—	(1,233,491	)	(1,233,491	)	—		—		—			—			(35,183		)	(35,183		)
Stock-based compensation expense and restricted stock unit vesting	—	—		680,128	(294,817	)	385,311		7		20,398		—			—			(9,958		)	10,447
Balance as of June 30, 2018	515	$	5,063	65,796,060	(3,107,996	)	62,688,064		$	658	$	366,515	$	671,348		$	(613	)	$	(82,458	)	$	960,513
Net income	—	—		—	—		—		—		—		155,131			—			—			155,131
Other comprehensive income (loss)	—	—		—	—		—		—		—		—			629			—			629
Cash dividends on preferred stock	—	—		—	—		—		—		—		(309		)	—			—			(309		)
Purchase of treasury stock	—	—		—	(2,009,352	)	(2,009,352	)	—		—		—			—			(56,437		)	(56,437		)
Stock-based compensation expense and restricted stock unit vesting	—	—		767,862	(317,757	)	450,105		8		23,430		—			—			(9,915		)	13,523
Balance as of June 30, 2019	515	$	5,063	66,563,922	(5,435,105	)	61,128,817		$	666	$	389,945	$	826,170		$	16		$	(148,810	)	$	1,073,050
Net income	—	—		—	—		—		—		—		183,438			—			—			183,438
Other comprehensive income (loss)	—	—		—	—		—		—		—		—			(953		)	—			(953		)
Cash dividends on preferred stock	—	—		—	—		—		—		—		(309		)	—			—			(309		)
Purchase of treasury stock	—	—		—	(1,970,464	)	(1,970,464	)	—		—		—			—			(38,858		)	(38,858		)
Stock-based compensation expense and restricted stock unit vesting	—	—		759,131	(304,849	)	454,282		7		21,928		—			—			(7,457		)	14,478
Balance as of June 30, 2020	515	$	5,063	67,323,053	(7,710,418	)	59,612,635		$	673	$	411,873	$	1,009,299		$	(937	)	$	(195,125	)	$	1,230,846

S-5

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

	Year Ended June 30,
(Dollars in thousands)	2020			2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	183,438		$	155,131		$	152,411
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Accretion of discounts on securities	291			(264		)	(624		)
Net accretion of discounts on loans and leases	(35,493		)	(30,176		)	(29,381		)
Amortization of borrowing costs	208			208			208
Amortization of operating lease right of use asset	(6,299		)	—			—
Stock-based compensation expense	21,935			23,439			20,399
Trading activity, (net)	1,217			—			—
Net (gain) loss on sale of investment securities	—			(709		)	18
Impairment charge on securities	—			821			156
Provision for loan and lease losses	42,200			27,350			25,800
Broker-dealer reserve for bad debt	—			15,298			—
Deferred income taxes	(6,735		)	(8,686		)	17,034
Origination of loans held for sale	(1,601,579		)	(1,471,906		)	(1,564,165		)
Unrealized (gain) loss on loans held for sale	(1,360		)	(252		)	(253		)
Gain on sales of loans held for sale	(27,517		)	(11,427		)	(19,489		)
Proceeds from sale of loans held for sale	1,614,379			1,481,911			1,576,353
Change in fair value of mortgage servicing rights	5,806			3,362			83
(Gain) loss on sale of other real estate and foreclosed assets	(449		)	(283		)	(258		)
Depreciation and amortization	24,443			16,471			8,574
Net changes in assets and liabilities which provide (use) cash:
Securities borrowed	(77,662		)	13,192			—
Customer, broker-dealer and clearing receivables	(17,074		)	13,684			—
Other assets	(45,852		)	(27,564		)	(47,070		)
Securities loaned	57,589			(4,685		)	—
Customer, broker-dealer and clearing payables	109,010			(1,506		)	—
Accounts payable and accrued liabilities	26,135			11,012			28,119
Net cash provided by operating activities	$	266,631		$	204,421		$	167,915
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities	(304,930		)	(146,886		)	(100,503		)
Proceeds from sales of securities	—			15,863			52,714
Proceeds from repayment of securities	343,191			93,779			139,338
Purchase of stock of regulatory agencies	(55,870		)	(204,206		)	(33,966		)
Proceeds from redemption of stock of regulatory agencies	55,536			203,611			79,923
Origination of loans and leases held for investment	(6,586,761		)	(6,756,832		)	(5,895,902		)
Proceeds from sale of loans and leases held for investment	37,300			119,881			20,719
Mortgage warehouse loans activity, net	(172,319		)	(126,491		)	(26,899		)
Proceeds from sales of other real estate owned and repossessed assets	2,241			2,202			1,832
Cash paid for deposit acquisition	—			(14,747		)	—
Cash paid for acquisition	—			—			(70,002		)
Acquisition of business activity, net of cash paid	—			67,343			—
Purchases of loans and leases, net of discounts and premiums	—			(11,525		)	—
Principal repayments on loans and leases	5,362,993			5,846,349			4,818,558
Furniture, equipment and software expenditures	(12,333		)	(20,082		)	(11,817		)
Net cash used in investing activities	$	(1,330,952	)	$	(931,741	)	$	(1,026,005	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	$	2,353,521		$	997,823		$	1,085,843
Net (repayment) proceeds of the Federal Home Loan Bank term advances	10,000			(147,500		)	(30,000		)
Net (repayment) proceeds of Federal Home Loan Bank other advances	(226,000		)	149,000			(153,000		)
Net (repayment) proceeds of other borrowings	(85,300		)	21,700			(20,000		)
Proceeds from Paycheck Protection Program Liquidity Facility advances	151,952			—			—
Tax payments related to settlement of restricted stock units	(7,457		)	(9,916		)	(9,952		)
Repurchase of treasury stock	(38,858		)	(56,437		)	(35,183		)
Cash dividends paid on preferred stock	(386		)	(232		)	(309		)
Net proceeds from issuance of subordinated notes	—			7,400			—
Net cash provided by financing activities	$	2,157,472		$	961,838		$	837,399
NET CHANGE IN CASH AND CASH EQUIVALENTS	1,093,151			234,518			(20,691		)
CASH AND CASH EQUIVALENTS—Beginning of year	857,368			622,850			643,541
CASH AND CASH EQUIVALENTS—End of year	$	1,950,519		$	857,368		$	622,850
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid on deposits and borrowed funds	$	145,452		$	152,756		$	106,112
Income taxes paid	$	80,430		$	64,117		$	79,628
Transfers to other real estate and repossessed vehicles	$	1,315		$	850		$	10,113
Transfers from loans and leases held for investment to loans held for sale	$	141,849		$	106,911		$	31,207
Transfers from loans held for sale to loans and leases held for investment	$	—		$	1,714		$	3,969
Loans held for investment sold, cash not received	$	61,029		$	—		$	17,742
Operating lease liabilities for obtaining right of use assets	$	82,940		$	—		$	—
Preferred stock dividends declared but not paid	$	—		$	77		$	—

S-6

LOANS AND LEASES

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



(Unaudited) (Dollars in thousands)	June 30, 2020			June 30, 2019
Single family real estate secured:
Mortgage	$	4,244,563		$	4,281,080
Warehouse	474,318			301,999
Financing¹	682,477			518,560
Multifamily real estate secured	2,303,216			1,948,513
Commercial real estate secured - mortgage	371,176			326,154
Auto and RV secured	291,452			290,894
Commercial & Industrial	2,094,322			1,662,629
Other	241,918			119,481
Total gross loans and leases	10,703,442			9,449,310
Allowance for loan and lease losses	(75,807		)	(57,085		)
Unaccreted premiums (discounts) and loan and lease fees	3,714			(10,101		)
Total net loans and leases	$	10,631,349		$	9,382,124

^1. Single family real estate secured: Financing consists of commercial specialty and lender finance loans secured by single family real estate.

S-7

SECURITIES

The amortized cost, carrying amount and fair value for the major categories of trading and available for sale securities at June 30, 2020 and June 30, 2019 were:



	June 30, 2020
	Trading		Available for sale
(Unaudited) (Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Mortgage-backed securities (RMBS):
U.S agencies¹	$	—	$	16,192	$	634	$	—		$	16,826
Non-agency²	—		18,180		1,024		(872		)	18,332
Total mortgage-backed securities	—		34,372		1,658		(872		)	35,158
Other debt securities:
U.S. agencies¹	—		1,799		—		—			1,799
Municipal	105		10,550		44		(194		)	10,400
Non-agency	—		141,338		1		(1,069		)	140,270
Total other debt securities	105		153,687		45		(1,263		)	152,469
Total debt securities	$	105	$	188,059	$	1,703	$	(2,135	)	$	187,627


	June 30, 2019
	Trading		Available for sale
(Unaudited) (Dollars in thousands)	Fair Value		Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Mortgage-backed securities (RMBS):
U.S agencies¹	$	—	$	9,486	$	179	$	(79	)	$	9,586
Non-agency²	—		13,489		226		(690		)	13,025
Total mortgage-backed securities	—		22,975		405		(769		)	22,611
Other debt securities:
U.S. agencies¹	—		1,682		3		—			1,685
Municipal	—		21,974		16		(828		)	21,162
Non-agency	—		179,976		2,088		(9		)	182,055
Total other debt securities	—		203,632		2,107		(837		)	204,902
Total debt securities	$	—	$	226,607	$	2,512	$	(1,606	)	$	227,513

¹ U.S. government-backed including and Ginnie Mae, or government sponsored enterprises including Fannie Mae and Freddie Mac.

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

S-8

DEPOSITS

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



(Unaudited)	June 30, 2020				June 30, 2019
(Dollars in thousands)	Amount		Rate¹		Amount		Rate¹
Non-interest bearing	$	1,936,661	—	%	$	1,441,930	—	%
Interest bearing:
Demand	3,456,127		0.37	%	2,709,014		2.06	%
Savings	3,697,188		0.78	%	2,466,214		1.48	%
Total interest-bearing demand and savings	7,153,315		0.58	%	5,175,228		1.78	%
Time deposits:
$250 and under	1,584,034		2.12	%	1,866,811		2.47	%
Greater than $250	662,684		1.39	%	499,204		2.27	%
Total time deposits	2,246,718		1.91	%	2,366,015		2.43	%
Total interest bearing²	9,400,033		0.90	%	7,541,243		1.99	%
Total deposits	$	11,336,694	0.75	%	$	8,983,173	1.67	%

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

^2. The total interest-bearing includes brokered deposits of $1,318.0 million and $1,124.0 million as of June 30, 2020 and June 30, 2019, respectively, of which $603.6 million and $796.7 million, respectively, are time deposits classified as $250 and under.

The number of deposit accounts at the end of each of the last five fiscal years is set forth below:



	At June 30,
	2020	2019	2018	2017	2016
Non-interest-bearing, prepaid and other¹	3,361,965	3,743,334	3,535,904	3,113,128	1,816,266
Checking and savings accounts	310,463	311,067	270,082	274,962	292,012
Time deposits	18,450	23,447	2,309	2,748	4,807
Total number of deposit accounts	3,690,878	4,077,848	3,808,295	3,390,838	2,113,085

^1. Our non-interest bearing, prepaid and other accounts contain two omnibus accounts that when condensed for regulatory

reporting purposes result in 27,108 accounts as of June 30, 2020.

S-9

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 June 30,
	2020						2019
(Unaudited) (Dollars in thousands)	Average Balance²		Interest Income / Expense		Average Yields Earned / Rates Paid¹		Average Balance²		Interest Income / Expense		Average Yields Earned / Rates Paid¹
Assets:
Loans and leases^3,4	$	10,570,886	$	137,194	5.19	%	$	9,234,461	$	128,268	5.56	%
Interest-earning deposits in other financial institutions	930,622		365		0.16	%	710,703		4,333		2.44	%
Securities⁴	231,396		2,858		4.94	%	226,523		3,778		6.67	%
Securities borrowed and margin lending	297,163		3,560		4.79	%	350,413		4,776		5.45	%
Stock of the regulatory agencies	28,719		166		2.31	%	31,054		488		6.29	%
Total interest-earning assets	12,058,786		144,143		4.78	%	10,553,154		141,643		5.37	%
Non-interest-earning assets	411,004						325,078
Total assets	$	12,469,790					$	10,878,232
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	5,092,648	$	10,222	0.80	%	$	4,119,350	$	16,921	1.64	%
Time deposits	2,446,915		13,720		2.24	%	2,625,852		15,774		2.40	%
Securities loaned	153,573		115		0.30	%	478,196		376		0.31	%
Advances from the FHLB	807,680		1,777		0.88	%	963,062		5,986		2.49	%
Borrowings, subordinated notes and debentures	83,228		1,037		4.98	%	154,749		2,149		5.55	%
Total interest-bearing liabilities	8,584,044		26,871		1.25	%	8,341,209		41,206		1.98	%
Non-interest-bearing demand deposits	2,139,803						1,385,750
Other non-interest-bearing liabilities	510,889						98,741
Stockholders’ equity	1,235,054						1,052,532
Total liabilities and stockholders’ equity	$	12,469,790					$	10,878,232
Net interest income			$	117,272					$	100,437
Interest rate spread⁵					3.53	%					3.39	%
Net interest margin⁶					3.89	%					3.81	%

¹ Annualized.

² Average balances are obtained from daily data.

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

⁴ Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loans and leases include average balances of $27.7 million and $28.4 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2020 and 2019 three-month periods respectively.

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

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

S-10

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

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



	For the Fiscal Years Ended June 30,
	2020						2019						2018
(Unaudited)(Dollars in thousands)	Average Balance¹		Interest Income / Expense		Average Yields Earned / Rates Paid		Average Balance¹		Interest Income / Expense		Average Yields Earned / Rates Paid		Average Balance¹		Interest Income / Expense		Average Yields Earned / Rates Paid
Assets:
Loans and leases^2,3	$	10,149,867	$	582,748	5.74	%	$	8,974,820	$	525,317	5.85	%	$	7,893,072	$	446,991	5.66	%
Interest-earning deposits in other financial institutions	833,612		10,906		1.31	%	631,228		13,495		2.14	%	807,348		12,450		1.54	%
Securities³	217,598		11,061		5.08	%	210,189		13,943		6.63	%	209,434		11,335		5.41	%
Securities borrowed and margin lending	362,063		16,585		4.58	%	173,829		8,746		5.03	%	N/A		N/A		—	%
Stock of the regulatory agencies	28,776		1,539		5.35	%	41,078		3,386		8.24	%	61,222		4,298		7.02	%
Total interest-earning assets	11,591,916		622,839		5.37	%	10,031,144		564,887		5.63	%	8,971,076		475,074		5.30	%
Non-interest-earning assets	395,789						234,993						100,380
Total assets	$	11,987,705					$	10,266,137					$	9,071,456
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	4,844,700	$	66,883	1.38	%	$	3,906,833	$	61,391	1.57	%	$	4,706,238	$	54,013	1.15	%
Time deposits	2,482,151		60,033		2.42	%	2,322,039		55,689		2.40	%	990,635		25,838		2.61	%
Securities loaned	247,420		679		0.27	%	221,469		748		0.34	%	N/A		N/A		—	%
Securities sold under agreements to repurchase	—		—		—	%	—		—		—	%	5,575		229		4.11	%
Advances from the FHLB	747,358		11,988		1.60	%	1,397,460		32,834		2.35	%	1,296,120		22,848		1.76	%
Borrowings, subordinated notes and debentures	103,652		5,645		5.45	%	104,287		5,620		5.39	%	54,522		3,652		6.70	%
Total interest-bearing liabilities	8,425,281		145,228		1.72	%	7,952,088		156,282		1.97	%	7,053,090		106,580		1.51	%
Non-interest-bearing demand deposits	1,990,005						1,227,285						1,052,944
Other non-interest-bearing liabilities	397,506						76,651						68,361
Stockholders’ equity	1,174,913						1,010,113						897,061
Total liabilities and stockholders’ equity	$	11,987,705					$	10,266,137					$	9,071,456
Net interest income			$	477,611					$	408,605					$	368,494
Interest rate spread⁴					3.65	%					3.66	%					3.79	%
Net interest margin⁵					4.12	%					4.07	%					4.11	%

¹ Average balances are obtained from daily data.

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

³ Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loans and leases include average balances of $28.0 million, $28.7 million, and $29.3 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2020 2019, and 2018 fiscal years respectively.

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

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

S-11

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

BANKING BUSINESS

The following table presents our Banking segment’s information regarding (i) average balances; (ii) the total amount of interest income from interest-earning assets and the weighted average yields on such assets; (iii) the total amount of interest expense on interest-bearing liabilities and the weighted average rates paid on such liabilities; (iv) net interest income; (v) interest rate spread; and (vi) net interest margin for the three months ended June 30, 2020 and 2019:



	For the Three Months Ended
	June 30,
	2020						2019
(Dollars in thousands)	Average Balance¹		Interest Income/ Expense		Average Yields Earned/Rates Paid²		Average Balance¹		Interest Income/ Expense		Average Yields Earned/Rates Paid²
Assets:
Loans and leases^{3, 4}	$	10,516,828	$	136,532	5.19	%	$	9,234,449	$	128,268	5.56	%
Interest-earning deposits in other financial institutions	763,989		192		0.10	%	524,403		3,128		2.39	%
Securities⁴	269,288		3,137		4.66	%	224,828		3,779		6.72	%
Stock of the regulatory agencies	25,474		165		2.59	%	28,414		486		6.84	%
Total interest-earning assets	11,575,579		140,026		4.84	%	10,012,094		135,661		5.42	%
Non-interest-earning assets	185,795						188,959
Total assets	$	11,761,374					$	10,201,053
Liabilities and Stockholders’ Equity:
Interest-bearing demand and savings	$	5,108,866	$	10,254	0.80	%	$	4,143,734	$	16,964	1.64	%
Time deposits	2,446,915		13,720		2.24	%	2,625,852		15,774		2.40	%
Advances from the FHLB	807,680		1,777		0.88	%	963,062		5,987		2.49	%
Borrowings, subordinated notes and debentures	12,416		11		0.35	%	22		—		—	%
Total interest-bearing liabilities	8,375,877		25,762		1.23	%	7,732,670		38,725		2.00	%
Non-interest-bearing demand deposits	2,148,671						1,389,998
Other non-interest-bearing liabilities	98,020						70,848
Stockholders’ equity	1,138,806						1,007,537
Total liabilities and stockholders’ equity	$	11,761,374					$	10,201,053
Net interest income			$	114,264					$	96,936
Interest rate spread⁵					3.61	%					3.42	%
Net interest margin⁶					3.95	%					3.87	%

^1. Average balances are obtained from daily data.

^2. Annualized.

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

^4. Interest income includes reductions for amortization of loan and investment securities premiums and earnings from accretion of discounts and loan fees. Loans and leases include average balances of $27.7 million and $28.4 million of Community Reinvestment Act loans which are taxed at a reduced rate for the 2020 and 2019 three-month periods respectively.

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

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

S-12

SECURITIES BUSINESS

Selected information concerning Axos Clearing LLC follows as of and for the three months ended:



(Dollars in thousands)	June 30, 2020			June 30, 2019
Compensation as a % of net revenue	39.2		%	35.0		%
FDIC insured program balances at banks (end of period)	$	450,251		$	341,576
Customer margin balances (end of period)	$	206,702		$	189,193
Customer funds on deposit, including short credits (end of period)	$	194,042		$	206,469

Clearing:
Total tickets	1,228,635			595,962
Correspondents (end of period)	61			62

Securities lending:
Interest-earning assets – stock borrowed (end of period)	$	222,368		$	144,706
Interest-bearing liabilities – stock loaned (end of period)	$	255,945		$	198,356

S-13

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