Axos Financial, Inc.

Our Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to our Company’s financial condition and operating results and management’s regular review of the operating results of those services. Our Company operates through two operating segments: the Banking Business Segment and the Securities Business Segment. In order to reconcile the two segments to the consolidated totals, our Company includes corporate activities and intercompany eliminations. Inter-segment transactions are eliminated in consolidation and primarily include non-interest income earned by the Securities Business Segment and non-interest expense incurred by the Banking Business Segment for cash sorting fees related to deposits sourced from Securities Business Segment customers.

The following tables present the operating results of the segments:

Banking Business Segment

For the three months ended September 30, 2025, the Banking Business Segment had income before income taxes of $153.8 million, compared to income before income taxes of $164.8 million for the three months ended September 30, 2024.

For the three months ended September 30, 2025, the Banking Business Segment’s net interest income decreased $1.3 million, or 0.4% compared to net interest income for the three months ended September 30, 2024. The decrease in net interest income was primarily due to a decrease in interest income on deposits in other financial institutions, primarily driven by lower rates earned, as well as lower interest earned on loans, reflecting lower rates earned, partially offset by higher average balances. These decreases were partially offset by a decrease in interest expense on demand and savings deposits, reflecting lower rates paid, partially offset by higher deposit balances.

The increase in non-interest income for the three months ended September 30, 2025 was primarily due to higher income on BOLI policies and more favorable servicing rights fair value adjustments in the current period.

For the three months ended September 30, 2025, the Banking Business Segment’s non-interest expense increased $10.2 million, or 8.6%, compared to non-interest expense for the three months ended September 30, 2024. The increase in non-interest expense for the three months ended September 30, 2025 reflected higher professional services expense, primarily due to higher legal expenses and acquisition-related costs associated with the Verdant acquisition, as well as higher data and operational processing expense.

We consider the ratios shown in the table below to be key indicators of the performance of our Banking Business Segment:

Our Banking Business 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 Segment and reduce our consolidated net interest margin, such as the borrowing costs at our Company and the yields and costs associated with certain items within interest-earning assets and interest-bearing liabilities in our Securities Business Segment, including items related to securities financing operations.

Securities Business Segment

For the three months ended September 30, 2025, our Securities Business Segment had income before income taxes of $8.3 million, compared to income before income taxes of $9.1 million, for the three months ended September 30, 2024.

For the three months ended September 30, 2025, net interest income increased $0.9 million, or 12.8%, compared to net interest income for the three months ended September 30, 2024. The increase for the three months ended September 30, 2025 was primarily attributable to higher interest earned on securities borrowed, as well as deposits in other financial institutions.

For the three months ended September 30, 2025, non-interest income decreased $0.4 million, or 1.5%, compared to the three months ended September 30, 2024. The decrease was primarily driven by lower broker-dealer fee income as a result of lower rates earned on cash sorting balances, partially offset by higher average cash sorting balances. This decrease was partially offset by higher advisory fee income, primarily attributable to increased advisor statement fees and higher mutual fund balances.

For the three months ended September 30, 2025, non-interest expense increased $1.3 million or 4.5%, compared to the three months ended September 30, 2024. The increase reflects higher data and operational processing and professional services expenses.

The following table provides selected information for Axos Clearing: