Axos Financial, Inc.

Axos Financial, Inc. operates as a technology-driven, diversified financial services company with approximately $30.0 billion in assets and approximately $47.8 billion of assets under custody and/or administration at Axos Clearing LLC ¹. The company provides secure and scalable banking, clearing and custody, and investment advisory solutions to retail and business customers through its client-centric, technology-enabled services model ². The industry is intensely competitive, with competition based on brand recognition, product quality, price, and innovation ³. Many competitors have greater brand recognition, longer operating histories, larger customer bases, and significantly greater financial, marketing, and other resources ⁴. Technological innovation and capabilities, including changes in product delivery systems and web-based tools, continue to contribute to greater competition in domestic and international financial services markets ⁵.

The company separates itself from the competition through excellence in customer service, including a highly attentive and dedicated workforce, while providing an expanding range of clearing and advisory products and services ⁶. In the Banking Business Segment, competition for deposits comes from a wide variety of depository and non-depository financial institutions, and the company competes by offering superior service and a variety of deposit accounts at competitive rates ⁷. In real estate lending, the company competes against traditional real estate lenders, including large and small savings banks, commercial banks, mortgage bankers, mortgage brokers, insurance companies, private equity firms, and hedge funds ⁸. In the Securities Business Segment, Axos Clearing competes directly with numerous other financial advisory and investment banking firms, broker-dealers, and banks, including large national and major regional firms and smaller niche companies ⁹.

The company generates revenue through two primary operating segments: the Banking Business Segment and the Securities Business Segment ¹⁰. The Banking Business Segment provides consumer and commercial banking products and services, including deposit accounts and a variety of lending products, and generates non-interest income from fees for loans originated for sale, operating lease income, deposit account service fees, prepayment fees, loan servicing fees, and technology and payment transaction processing fees ¹¹. The Securities Business Segment generates both fee and interest income by providing securities custody services to registered investment advisors, clearing, stock lending, and margin lending services to introducing broker-dealers, and self-directed securities trading and digital wealth management services through Axos Invest ¹². The Securities Business Segment is also a source of low-cost deposits for the company ¹³.

The Banking Business Segment distributes loan products through retail, correspondent, and wholesale channels, retaining primarily first mortgages secured by single family real property, multifamily real property, and commercial real property, commercial & industrial loans and leases to businesses, automobile loans, and certain other consumer loans ¹⁴. The segment also invests in debt securities to manage liquidity and interest rate risk ¹⁵. The Single Family - Mortgage & Warehouse loans are primarily secured by first liens on 1-4 unit residential properties, including fixed- and adjustable-rate single family residential mortgages and home equity lines of credit, with adjustable-rate loans having initial fixed-rate periods generally of five, seven, or ten years ¹⁶. Multifamily and Commercial Mortgage loans are primarily secured by multifamily real estate or commercial real estate, often with initial fixed rate periods of either three, five, or seven years before starting a variable rate period based on SOFR or other interest rate indices ¹⁷. Commercial Real Estate loans are secured by real estate properties in a variety of structures, including CRE specialty loans, real estate lender finance loans, and other CRE loans, generally with a variable rate based on SOFR ¹⁸. Commercial & Industrial - Non-Real Estate loans are typically secured by commercial assets, including receivables, inventory, equipment, and other assets, with product types including lender finance, asset-based loans, leveraged cash flow loans, insurance premium finance, capital call facilities, equipment loans and leases, floor plan loans, and general working capital loans ¹⁹. Auto loans are secured by new and used automobiles, sourced primarily through indirect channels, with prime credit quality, fixed interest rates, and terms ranging from three to eight years ²⁰. Consumer loans are fixed rate, unsecured loans to well-qualified, individual borrowers sourced through existing bank customers, lead aggregators, and other marketing efforts ²¹.

The Securities Business Segment provides investment and wealth management services to individual and institutional clients, primarily through Axos Clearing and its business division, Axos Advisor Services ²². At June 30, 2026, the company provided services to approximately 300 financial organizations, including correspondent broker-dealers and registered investment advisors ²³. Axos Clearing offers fully disclosed clearing services to FINRA and SEC registered member firms for trade execution and clearance, in addition to back-office services such as recordkeeping, trade reporting, and reorganization assistance ²⁴. Axos Clearing also provides margin loans, which are collateralized by securities or cash, and conducts securities lending activities, including borrowing and lending securities with other broker-dealers ²⁵. Axos Advisor Services provides registered investment advisors with a proprietary turnkey technology platform with client-account information and trading capabilities, including account opening, money movement, transfer of assets, trading, and communication with the service team ²⁶. Axos Invest provides retail self-directed and digital advice services ²⁷.

The company's deposit franchise is a strategic funding advantage with greater scalability than branch-intensive banking models, which operate with limited marketing reach, slower deposit fundraising capabilities, and inherently higher fixed operating costs ²⁸. Deposit lines of business include commercial deposits sourced from targeted industry verticals such as middle market industries, title, escrow, homeowner association, property management, 1031 exchange, trust & estates, and payment processors, as well as software verticals including Axos Fiduciary Services and Zenith Information Systems, Inc. ²⁹. Consumer deposits primarily include retail and small business deposits as well as sweep deposits from financial advisory and clearing firms, including Axos Clearing and its business division, Axos Advisor Services ³⁰. The company may also from time-to-time acquire deposits from other institutions ³¹.

In fiscal year 2026, the company's total assets were approximately $30.0 billion ³². The company's common stock is listed on the New York Stock Exchange under the ticker symbol "AX" and is a component of the Russell 2000® Index and the S&P SmallCap 600® Index ³³. At June 30, 2026, the company had 2,191 full-time employees, none of whom are represented by a labor union or subject to a collective bargaining agreement ³⁴. The company has not experienced any work stoppage and considers its relations with its employees to be satisfactory ³⁵.

A significant growth vector is the expansion of the deposit franchise, which the company believes will continue to provide strategic funding advantages with greater scalability than branch-intensive banking models ³⁶. The company generates deposits through a variety of channels, including advertisements, sales teams, software company affiliates, financial advisory firms, affinity partnerships, and its lending businesses ³⁷. The company may also from time-to-time acquire deposits from other institutions ³⁸.

Another growth vector is the Securities Business Segment, which provides a wide range of investment and wealth management services to individual and institutional clients ³⁹. The company provides services to approximately 300 financial organizations, including correspondent broker-dealers and registered investment advisors ⁴⁰. Axos Clearing offers fully disclosed clearing services and back-office services, while Axos Advisor Services provides a proprietary turnkey technology platform with integrations with third-party platforms that support client relationship management, portfolio management, trade order management, and financial planning ⁴¹. Axos Invest provides retail self-directed and digital advice services ⁴².

The company may continue to purchase loans and securities from time to time because risk-adjusted returns available on acquired assets may exceed returns available through retaining assets from its origination channels ⁴³. The company also invests in debt securities to manage liquidity and interest rate risk ⁴⁴.

The company's capital allocation strategy includes maintaining regulatory capital levels that exceed minimums necessary to be considered "well-capitalized" ⁴⁵. As of June 30, 2026, the capital ratios of both the Company and the Bank exceeded the minimums necessary to be considered "well-capitalized" under the capital adequacy requirements ⁴⁶. The company is subject to a capital conservation buffer of 2.5% above regulatory minimum levels to avoid restrictions on capital distributions, including the payment of dividends ⁴⁷.

The company faces headwinds from changes in interest rates, which can adversely affect net interest income, loan origination and repayment rates, and the value of loans, leases, investments, and other interest-rate sensitive assets ⁴⁸. Increases in interest rates can negatively impact the business, including a possible reduction in customers' desire to borrow money or adversely affecting customers' ability to repay outstanding loans ⁴⁹. On the deposit side, increasing interest rates generally lead to higher rates paid for deposit accounts ⁵⁰.

The company faces headwinds from a significant or sustained economic downturn, which could result in increases in the level of non-performing loans and leases and/or reduce demand for products and services ⁵¹. The company operates in an uncertain economic environment due to trade policies and disputes, tariffs, geopolitical tensions and global military conflicts, inflation, fluctuating commodity prices, and volatile global supply chains and energy market prices ⁵². Given the high concentration of loans secured by real estate in California and New York, the company remains particularly susceptible to a downturn in those states' economies ⁵³.

The company faces headwinds from changes in U.S. trade policies, including the imposition of tariffs and retaliatory tariffs, which may adversely impact the business, financial condition, and results of operations ⁵⁴. Tariffs have led to increased trade and political tensions, which could reduce trade volume, investment, technological exchange, and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets ⁵⁵.

The company's real estate loan portfolio is highly concentrated in California and New York, with approximately 37.4% and 33.5% of the real estate loan portfolio secured by real estate located in New York and California, respectively, at June 30, 2026 ⁵⁶. A downturn in these markets could result in increased defaults and reduced collateral values, adversely affecting profitability and asset quality ⁵⁷. The commercial and industrial loan portfolio was approximately $9.5 billion at June 30, 2026, or 36.4% of the total loan portfolio, and commercial loans generally carry large balances and may involve a greater degree of financial and credit risk than other loans ⁵⁸. The commercial real estate portfolio was approximately $8.9 billion, or 34.0% of the total loan portfolio at June 30, 2026, with $509.5 million, or 7%, of the commercial real estate specialty loan portfolio secured by office buildings ⁵⁹. The ongoing shift toward remote and hybrid work arrangements has reduced, and may continue to reduce, demand for commercial office space, which could impair borrowers' ability to repay loans or reduce collateral values ⁶⁰. The company's multifamily residential loans were $2.5 billion or 9.5% of the loan portfolio at June 30, 2026, and payment on such loans is typically dependent on cash flows generated by the projects ⁶¹. The company is also exposed to interest rate risk, as its results of operations depend to a great extent on net interest income, and large, unanticipated, or rapid increases in market interest rates may have an adverse impact on net interest income and could decrease mortgage refinancing business and related fee income ⁶².

Management's message emphasizes the company's position as a technology-driven, diversified financial services company with approximately $30.0 billion in assets and approximately $47.8 billion of assets under custody and/or administration at Axos Clearing LLC ⁶³. The strategic priorities emphasized include maintaining a client-centric, technology-enabled services model that provides secure and scalable banking, clearing and custody, and investment advisory solutions to retail and business customers ⁶⁴. Management highlights the deposit franchise as a strategic funding advantage with greater scalability than branch-intensive banking models ⁶⁵. The company also emphasizes its commitment to human capital management, with objectives to attract, retain, and develop the highest quality talent, supported by market-based, competitive wages and benefits, and investment in technology, training, tools, and resources ⁶⁶. Management also notes the company's regulatory compliance, with capital ratios exceeding minimums necessary to be considered "well-capitalized" as of June 30, 2026 ⁶⁷.