Axos Financial, Inc.
For the period ended Jun 30, 2026. Filed Aug 20, 2026.
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FY2026 · Filed Aug 20, 2026
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3. Fair Value
- FAIR VALUE
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. ASC Topic 820 describes three levels of inputs that may be used to measure fair value:
| Level 1: | Quoted prices in active markets for identical assets or liabilities that the entity has the ability to access at the measurement date. |
|---|---|
| Level 2: | Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. |
| Level 3: | Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models such as discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. |
Classification in the hierarchy is based upon the lowest level of input that is significant to the fair value measurement of the asset or liability.
The following section describes the valuation methodologies used by the Company to measure various financial instruments at fair value, including an indication of the level in the fair-value hierarchy in which each instrument is generally classified:
Securities—trading and available-for-sale. Trading and available-for-sale securities are recorded at fair value. Available-for-sale securities primarily consist of United States Treasury securities; mortgage-backed securities (“MBS”) issued by U.S. government-backed, including Ginnie Mae, or government-sponsored enterprises including Fannie Mae and Freddie Mac (“agency”); and non-agency MBS. Fair value for United States Treasury and agency securities is generally based on quoted market prices of similar securities used to form a dealer quote or a pricing matrix. These securities are classified in Level 2. There continues to be significant illiquidity in the market for certain MBS issued by non-agencies, including those held by the Company, which impacts the availability and reliability of transparent pricing. As orderly quoted market prices are not available, the Level 3 fair values for these securities are determined by the Company utilizing industry-standard tools to calculate the net present value of the expected cash flows available to the securities from the underlying mortgage assets.
The Company’s estimate of fair value for non-agency securities using Level 3 pricing is highly subjective and is based on the Company’s estimate of voluntary prepayments, default rates, severities and discount margins, which are forecasted monthly over the remaining life of each security. Changes in one or more of these assumptions can cause a significant change in the estimated fair value. For further details see the table later in this note that summarizes quantitative information about level 3 fair value measurements.
Loans Held for Sale. The fair value of loans held for sale is determined by pricing for comparable assets or by existing forward sales commitment prices with investors. Loans held for sale are classified as Level 2.
Other Assets— Loans Held For Investment at Fair Value. The fair value of Other assets—loans held for investment at fair value is determined by discounting the projected available cash flows of the underlying business. Other assets—loans held for investment at fair value are classified as Level 3.
Servicing Rights. Fair value is derived from market-driven valuation changes as well as modeled amortization involving the run-off of value that occurs due to the passage of time as individual loans are paid by borrowers. Market expectations about loan duration, and correspondingly the expected term of future servicing cash flows, may vary from time to time due to changes in expected prepayment activity, especially when interest rates rise or fall. Fair value is also dependent on the discount rate used in calculating present value, which is derived from observable market activity, market participants, and results in Level 3 classification. Management reviews and adjusts the discount rate and prepayment assumptions on an ongoing basis.
Derivatives. The fair value of interest rate locks is estimated based on changes in to be announced (“TBA”) values which are based upon mortgage interest rates from the date the interest on the loan is locked, adjusted for items such as estimated fallout and costs to originate the loan. These are classified under level 2.
The fair value of forward sale commitments is based upon prices in active secondary markets for identical securities or based on quoted market prices of similar assets used to form a dealer quote or a pricing matrix. If no such quoted price exists, the fair value of a commitment is determined by quoted prices for a similar commitment or commitments, adjusted for the specific attributes of each commitment. These are classified under level 2.
The fair value of interest rate swaps and caps entered into to facilitate customer transaction activity is based upon observable market forward rate curves. These are classified under Level 2.
The fair value of foreign exchange swaps and spot contracts is based primarily upon current spot exchange rates and forward exchange rates (derived from spot rates and interest rate differentials between the currency pairs). These are classified as Level 2.
Contingent Consideration. The fair value of the Contingent Consideration liability is determined using a Nelson-Siegel stochastic simulation, which models various scenarios based on business forecasts, including monthly asset growth of the Verdant business and other inputs in accordance with the terms of the agreement. The resulting simulated cash flows are then discounted to present value and averaged to determine fair value. The Contingent Consideration liability is classified as Level 3.
FAIR VALUE - RECURRING BASIS
The following table sets forth the Company’s financial assets and liabilities measured at fair value on a recurring basis. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement:
| June 30, 2026 | |||
|---|---|---|---|
| (Dollars in thousands) | Significant OtherObservableInputs(Level 2) | SignificantUnobservableInputs(Level 3) | Total |
| ASSETS: | |||
| Trading securities | $661 | $— | $661 |
| Available-for-sale securities: | |||
| United States Treasury securities | 732,422 | — | 732,422 |
| Agency MBS1 | 66,972 | — | 66,972 |
| Non-Agency MBS2 | — | 4,273 | 4,273 |
| Total—Available-for-sale securities: | $799,394 | $4,273 | $803,667 |
| Loans held for sale | $14,937 | $— | $14,937 |
| Servicing rights | $— | $25,653 | $25,653 |
| Other assets—Derivative instruments3 | $16,941 | $— | $16,941 |
| Other assets—Loans held for investment at fair value | $— | $10,000 | $10,000 |
| LIABILITIES: | |||
| Accounts payable and other liabilities—Derivative instruments | $52,509 | $— | $52,509 |
| Accounts payable and other liabilities—Contingent Consideration | $— | $30,810 | $30,810 |
| June 30, 2025 | |||
| (Dollars in thousands) | Significant OtherObservableInputs(Level 2) | SignificantUnobservableInputs(Level 3) | Total |
| ASSETS: | |||
| Trading securities | $649 | $— | $649 |
| Available-for-sale securities: | |||
| Agency MBS1 | 46,757 | — | 46,757 |
| Non-Agency MBS2 | — | 15,569 | 15,569 |
| Municipal | 3,682 | — | 3,682 |
| Total—Available-for-sale securities: | $50,439 | $15,569 | $66,008 |
| Loans held for sale | $10,012 | $— | $10,012 |
| Servicing rights | $— | $27,218 | $27,218 |
| Other assets—Derivative instruments3 | $17,734 | $— | $17,734 |
| LIABILITIES: | |||
| Accounts payable and other liabilities—Derivative instruments | $68,498 | $— | $68,498 |
1 Includes securities guaranteed by Ginnie Mae, a U.S. government agency, and the government sponsored enterprises Fannie Mae and Freddie Mac.
2 Private sponsors of securities collateralized primarily by first-lien mortgage loans on commercial properties or by pools of 1-4 family residential first mortgages. Primarily super senior securities secured by Alt-A or pay-option adjustable rate mortgages (“ARMs”).
3 Other assets - Derivative instruments are presented net of $52.3 million and $55.4 million of variation margin on centrally-cleared derivatives as of June 30, 2026 and June 30, 2025, respectively.
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:
| Fiscal Year Ended June 30, 2026 | ||||||
|---|---|---|---|---|---|---|
| (Dollars in thousands) · Available-for-Sale Securities:Non-Agency MBS · Servicing Rights1 · Other assets—Loans held for investment at fair value · Accounts payable andother liabilities—Contingent Consideration · Total | ||||||
| Opening balance | $15,569 | $27,218 | $— | $— | $42,787 | |
| Total gains or losses for the period: | ||||||
| Included in earnings—Mortgage banking and servicing rights income | — | (3,056) | — | — | (3,056) | |
| Included in earnings—General and administrative expense2 | — | — | 1,845 | — | 1,845 | |
| Included in other comprehensive income | (232) | — | — | — | (232) | |
| Purchases, retentions, issues, sales and settlements: | ||||||
| Purchases/Retentions/Sales | — | 1,491 | 6,802 | 30,810 | 39,103 | |
| Issuances | 1,353 | 1,353 | ||||
| Settlements | (11,064) | — | — | — | (11,064) | |
| Closing balance | $4,273 | $25,653 | $10,000 | $30,810 | $70,736 | |
| Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | $— | $(3,056) | $1,845 | $— | $(1,211) | |
1 Earnings from servicing rights were attributable to: time and payoffs, representing a decrease in servicing rights value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $1.4 million for the fiscal year ended June 30, 2026 and a decrease in servicing rights value resulting from market-driven changes in interest rates of $1.7 million for the fiscal year ended June 30, 2026. Additions to servicing rights were related to purchases and servicing rights retained upon sale of loans held for sale.
2 The amount included in earnings is not considered attributable to instrument-specific credit risk.
| Fiscal Year Ended June 30, 2025 | |||
|---|---|---|---|
| (Dollars in thousands) | Available-for-Sale Securities:Non-Agency MBS | Servicing Rights1 | Total |
| Opening Balance | $110,928 | $28,924 | $139,852 |
| Total gains or losses for the period: | |||
| Included in earnings—Mortgage banking and servicing rights income | — | (2,706) | (2,706) |
| Included in other comprehensive income | 905 | — | 905 |
| Purchases, retentions, issues, sales and settlements: | |||
| Purchases/Retentions | — | 1,000 | 1,000 |
| Settlements | (96,264) | — | (96,264) |
| Closing balance | $15,569 | $27,218 | $42,787 |
| Change in unrealized gains or losses for the period included in earnings for assets held at the end of the reporting period | $— | $(2,706) | $(2,706) |
1 Earnings from servicing rights were attributable to: time and payoffs, representing a decrease in servicing rights value due to passage of time, including the impact from both regularly scheduled loan principal payments and loans that were paid down or paid off during the period of $1.4 million for the fiscal year ended June 30, 2025 and an increase in servicing rights value resulting from market-driven changes in interest rates of $1.3 million for the fiscal year ended June 30, 2025. Additions to servicing rights were retained upon sale of loans held for sale.
The table below summarizes the quantitative information about Level 3 fair value measurements:
| June 30, 2026 | ||||
|---|---|---|---|---|
| (Dollars in thousands) | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average)1 |
| Available-for-sale securities – Non-Agency MBS | $4,273 | Discounted cash flow | Projected constant prepayment rate,Projected constant default rate,Projected loss severity,Discount rate over SOFR swaps,Credit enhancement | 2.5 to 15.7% (4.0%)1.5 to 1.9% (1.5%)40.0 to 68.9% (61.0%)2.5 to 4.7% (3.2%)0.0 to 78.2% (13.2%) |
| Servicing rights | $25,653 | Discounted cash flow | Projected constant prepayment rate,Life (in years),Discount rate | 4.1 to 30.7% (10.2%)2.7 to 14.2% (8.6%) 9.5 to 11.2% (9.8%) |
| Other assets—Loans held for investment at fair value | $10,000 | Discounted cash flow | Discount rateTerminal growth rateEBITDA multiple | 28% to 28% (28%)3% to 3% (3%) 1.0 times to 1.0 times (1.0 times) |
| Accounts payable and other liabilities—Contingent Consideration | $30,810 | Nelson-Siegel stochastic model | Monthly asset growth,Credit spread | -7.4 to 14.5% (3.6%)2.9 to 2.9% (2.9%) |
| June 30, 2025 | ||||
|---|---|---|---|---|
| (Dollars in thousands) | Fair Value | Valuation Technique | Unobservable Input | Range (Weighted Average)1 |
| Available-for-sale securities – Non-Agency MBS | $15,569 | Discounted cash flow | Projected constant prepayment rate,Projected constant default rate,Projected loss severity,Discount rate over SOFR,Credit enhancement | 2.5 to 30.0% (22.4%)1.5 to 11.9% (8.7%)35.0 to 68.9% (43.4%)2.5 to 4.1% (2.7%)0.0 to 99.0% (39.2%) |
| Servicing rights | $27,218 | Discounted cash flow | Projected constant prepayment rate,Life (in years),Discount rate | 5.2 to 26.6% (9.7%)2.5 to 12.8 (9.3) 9.5 to 11.2% (9.8%) |
1 The weighted average for Securities - Non-agency MBS is based on the relative fair value of the securities and for Servicing Rights is based on the relative unpaid principal of the loans being serviced and for Accounts payable and other liabilities—Contingent Consideration is based on annual projected consideration.
For non-agency mortgage-backed securities, a significant increase (decrease) in default rate, loss severity (potentially offset by the level of credit enhancement) or discount rate in isolation would result in a significantly lower (higher) fair value measurement, while a significant increase in the voluntary prepayment rate would result in a significant increase in fair value if the security is valued below par value, or a significant decrease in fair value if the security is valued above par value. Generally, a change in the assumptions used for the default rate is accompanied by a directionally opposite change in the assumption used for the voluntary prepayment rate.
For servicing rights, significant increases in the voluntary prepayment rate or discount rate in isolation would result in a significantly lower fair value measurement, while a significant increase in expected life in isolation would result in a significantly higher fair value measurement. Generally, a change in the voluntary prepayment rate is accompanied by a directionally opposite change in expected life.
For loans held for investment at fair value, a significant increase (decrease) to the growth rate and EBITDA multiple in isolation would result in significantly higher (lower) fair value measurement, and a significant increase (decrease) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement.
For the Contingent Consideration, a significant increase (decrease) in the asset growth in isolation would result in a significantly higher (lower) fair value measurement, and a significant increase (decrease) in the discount rate in isolation would result in a significantly lower (higher) fair value measurement.
The aggregate fair value of loans held for sale, carried at fair value, the contractual balance (including accrued interest) and the unrealized gain were:
| At June 30, | ||
|---|---|---|
| (Dollars in thousands) | 2026 | 2025 |
| Aggregate fair value | $14,937 | $10,012 |
| Unpaid principal balance | 14,476 | 9,870 |
The total interest income and amount of gains and losses from changes in fair value included in earnings for loans held for sale, carried at fair value, were:
| For the Fiscal Year Ended June 30, | |||
|---|---|---|---|
| (Dollars in thousands) | 2026 | 2025 | 2024 |
| Interest income | $789 | $999 | $769 |
| Change in fair value | 425 | (366) | 122 |
| Total | $1,214 | $633 | $891 |
As of June 30, 2026, the Company measured certain loans held for investment at fair value. The aggregate fair value of loans held for investment carried at fair value, was $10.0 million and the related unpaid principal balance was $133.4 million. As of June 30, 2026, the loans held for investment at fair value are more than 90 days past due and on nonaccrual status. The Company did not recognize any interest income on loans held for investment at fair value during the fiscal years ended June 30, 2026, 2025 and 2024.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts and estimated fair values of financial instruments at June 30, 2026 and June 30, 2025 were:
| June 30, 2026 | |||||
|---|---|---|---|---|---|
| Fair Value | |||||
| (Dollars in thousands) | CarryingAmount | Level 1 | Level 2 | Level 3 | Total Fair Value |
| Financial assets: | |||||
| Cash, cash equivalents and restricted cash | $1,307,802 | $1,307,802 | $— | $— | $1,307,802 |
| Trading securities | 661 | — | 661 | — | 661 |
| Available-for-sale securities | 803,667 | — | 799,394 | 4,273 | 803,667 |
| Stock of regulatory agencies | 36,166 | — | 36,166 | — | 36,166 |
| Loans held for sale, at fair value | 14,937 | — | 14,937 | — | 14,937 |
| Loans held for sale, at lower of cost or fair value | 5,129 | — | — | 5,303 | 5,303 |
| Loans held for investment—net | 25,595,403 | — | — | 25,789,184 | 25,789,184 |
| Securities borrowed | 163,462 | — | — | 161,870 | 161,870 |
| Customer, broker-dealer and clearing receivables | 347,944 | — | — | 345,800 | 345,800 |
| Servicing rights | 25,653 | — | — | 25,653 | 25,653 |
| Other assets - derivative instruments1 | 16,941 | — | 16,941 | — | 16,941 |
| Other assets - loans held for investment at fair value | 10,000 | — | — | 10,000 | 10,000 |
| Financial liabilities: | |||||
| Total deposits | 24,565,392 | — | 24,427,010 | — | 24,427,010 |
| Advances from the Federal Home Loan Bank | 154,000 | — | 150,677 | — | 150,677 |
| Secured financings | 576,680 | — | 568,019 | — | 568,019 |
| Borrowings, subordinated notes and debentures | 342,915 | — | 343,891 | — | 343,891 |
| Securities loaned | 194,729 | — | — | 193,717 | 193,717 |
| Customer, broker-dealer and clearing payables | 365,792 | — | — | 365,792 | 365,792 |
| Accounts payable and other liabilities - derivative instruments | 52,509 | — | 52,509 | — | 52,509 |
| Accounts payable and other liabilities - Contingent Consideration | 30,810 | — | — | 30,810 | 30,810 |
| June 30, 2025 | |||||
|---|---|---|---|---|---|
| Fair Value | |||||
| (Dollars in thousands) | CarryingAmount | Level 1 | Level 2 | Level 3 | Total Fair Value |
| Financial assets: | |||||
| Cash, cash equivalents and restricted cash | $2,176,354 | $2,176,354 | $— | $— | $2,176,354 |
| Trading securities | 649 | — | 649 | — | 649 |
| Available-for-sale securities | 66,008 | — | 50,439 | 15,569 | 66,008 |
| Stock of regulatory agencies | 35,163 | — | 35,163 | — | 35,163 |
| Loans held for sale, at fair value | 10,012 | — | 10,012 | — | 10,012 |
| Loans held for investment—net | 21,049,610 | — | — | 21,288,921 | 21,288,921 |
| Securities borrowed | 139,396 | — | — | 138,103 | 138,103 |
| Customer, broker-dealer and clearing receivables | 252,720 | — | — | 251,126 | 251,126 |
| Servicing rights | 27,218 | — | — | 27,218 | 27,218 |
| Other assets - derivative instruments1 | 17,734 | — | 17,734 | — | 17,734 |
| Financial liabilities: | |||||
| Total deposits | 20,829,543 | — | 20,642,953 | — | 20,642,953 |
| Advances from the Federal Home Loan Bank | 60,000 | — | 56,934 | — | 56,934 |
| Borrowings, subordinated notes and debentures | 312,671 | — | 285,282 | — | 285,282 |
| Securities loaned | 139,426 | — | — | 138,698 | 138,698 |
| Customer, broker-dealer and clearing payables | 350,606 | — | — | 350,606 | 350,606 |
| Accounts payable and other liabilities - derivative instruments | 68,498 | — | 68,498 | — | 68,498 |
1 Other assets - Derivative instruments are presented net of $52.3 million and $55.4 million of variation margin on centrally-cleared derivatives as of June 30, 2026 and June 30, 2025, respectively.
The methods and assumptions, not previously presented, used to estimate fair value are described as follows: The carrying amount represents the estimated fair value for cash, cash equivalents and restricted cash, stock of regulatory agencies, interest-bearing deposits, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. For fixed rate loans, deposits, borrowings or subordinated debt and for variable rate loans, deposits, borrowings, secured financings, or subordinated debt with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. A discussion of the methods of valuing trading securities, available-for-sale securities, loans held for sale and derivatives can be found earlier in this footnote. The fair value of off-balance sheet items is not considered material.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.