Axos Financial, Inc.

5. LOANS & ALLOWANCE FOR CREDIT LOSSES

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

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

Accrued interest receivable on loans held for investment totaled $109.6 million and $119.8 million as of June 30, 2025 and 2024, respectively.

At June 30, 2025 and 2024, the Company pledged certain loans totaling $4,284.7 million and $4,942.8 million, respectively, to the FHLB and $8,227.7 million and $8,197.2 million, respectively, to the Federal Reserve Bank of San Francisco (“FRBSF”).

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

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

The allowance for credit losses increased from June 30, 2024 to June 30, 2025, primarily due to the provision for credit losses, partially offset by net charge-offs. The provision for credit losses was primarily driven by the commercial & industrial - non-RE and commercial real estate portfolios, reflecting loan growth, as well as the quantitative impact of macroeconomic variables in the allowance for credit losses model, including the 5-year and 10-year U.S. Treasury rates and unemployment rates.

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

The following tables present a summary of the activity in the unfunded loan commitment liabilities for the periods indicated:

The following table presents LTVs for the Company’s real estate loans outstanding as of June 30, 2025:

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

There wereno nonaccrual loans without an allowance for credit losses as of June 30, 2025 and 2024. There wasno interest income recognized on nonaccrual loans in the fiscal year ended June 30, 2025 and 2024.

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. In addition to the borrower’s primary source of repayment, in its risk rating process the Company considers all available sources of repayment, including obligor guaranties and liquidations of pledged collateral, where individually or together such sources would fully repay the loan on a timely basis. The Company analyzes loans individually by classifying the loans based on credit risk. The Company uses the following internally-defined risk ratings:

Pass. Loans where repayment in full is expected through any of the borrower’s sources of repayment.

Special Mention. Loans where any credit risk is not considered significant yet require management’s attention given certain currently identified characteristics of the borrower, collateral securing the loan and the obligor’s net worth and paying capacity. If the identified credit risks are not adequately monitored or mitigated, the loan may weaken and the Company’s credit position with respect to the loan may deteriorate in the future.

Substandard. Loans where currently identified characteristics of the borrower, collateral securing the loan and the obligor’s net worth and paying capacity, taken together, could jeopardize the repayment of the debt. A loan not fully supported by at least one available source of repayment and involves a distinct possibility that the Company will sustain some loss in that loan if the weakness is not cured. A loan supported by a guaranty, collateral sufficient to incentivize a sale or refinance, or cash flow that is sufficient for timely repayment in full will not be classified as substandard even if the loan has a well-defined weakness in other sources of repayment.

Doubtful. Loans reflecting the same characteristics as those classified as substandard, but for which repayment in full in accordance with the contractual terms is currently considered highly unlikely.

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.

The following tables present the composition of loans by portfolio segment, fiscal year of origination and credit quality indicator, and the amount of gross charge-offs:

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

Loans reaching 90+ days past due are generally placed on nonaccrual. As of June 30, 2024, there was $20.2 million of loans over 90 days past due and still accruing interest. As of June 30, 2025 no loans were over 90 days past due and still accruing interest.

Single family mortgage loans in process of foreclosure were $30.4 million and $20.1 million as of June 30, 2025 and 2024, respectively.

Credit Risk Concentration

Concentrations of credit risk arise when a number of borrowers are engaged in similar business activities in the same geographic region, or when they have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions.

Concentrations of 10% or more existed in the Single Family, Multifamily and Commercial Real Estate loan categories at June 30, 2025 and June 30, 2024.

At June 30, 2025, California accounted for 70.5% and New York accounted for 8.6% of loans in the Single Family loan category. California accounted for 48.5% and New York accounted for 37.1% of loans in the Multifamily loan category. New York accounted for 36.8%, Florida accounted for 19.5% and Texas accounted for 10.2% of loans in the Commercial Real Estate loan category.

At June 30, 2024, California accounted for 69.3% and New York accounted for 11.7% of loans in the Single Family loan category. California accounted for 49.6% and New York accounted for 38.9% of loans in the Multifamily loan category. New York accounted for 34.2% and Florida accounted for 10.4% of loans in the Commercial Real Estate loan category.

Related Party Loans

In the ordinary course of business, the Company has granted related party loans collateralized by real property to certain executive officers, directors and their affiliates, which is summarized in the following table:

Loan Modifications to Borrowers Experiencing Financial Difficulty. The Company may grant certain modifications of loans to borrowers experiencing financial difficulty, which effective following the adoption of ASU 2022-02, are reported as financial difficulty modifications (“FDMs”). The Company’s modification programs provide various modifications to borrowers experiencing financial difficulty, which may include interest rate reductions, term extensions, payment delays and/or principal forgiveness. FDMs during the fiscal year ended June 30, 2025 and 2024 were not significant.