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 and six months ended December 31, 2025, the Banking Business Segment had income before income taxes of $186.8 million and $340.6 million, respectively, compared to income before income taxes of $152.9 million and $317.7 million, respectively, for the three and six months ended December 31, 2024.

For the three and six months ended December 31, 2025, the Banking Business Segment’s net interest income increased $51.8 million, or 18.7%, and $50.5 million, or 8.9%, respectively, compared to net interest income for the three and six months ended December 31, 2024. The increase in net interest income was primarily due to an increase in interest earned on loans, reflecting higher average balances, partially offset by a decrease in interest income on deposits in other financial institutions, primarily driven by lower average balances and lower rates earned. These increases were partially offset by an increase in interest expense, primarily on secured financings, partially offset by a decrease in interest expense on demand and savings deposits.

For the three and six months ended December 31, 2025, the Banking Business Segment’s non-interest income increased $29.9 million and $33.6 million, respectively, compared to non-interest income for the three and six months ended December 31, 2024. The increase in non-interest income for the three and six months ended December 31, 2025 was primarily due to higher banking and servicing fee income, mainly attributable to the Verdant acquisition.

For the three and six months ended December 31, 2025, the Banking Business Segment’s non-interest expense increased $35.0 million, or 30.6%, and $45.2 million, or 19.4%, respectively, compared to non-interest expense for the three and six months ended December 31, 2024. The increase in non-interest expense for the three and six months ended December 31, 2025 reflected higher depreciation and amortization expense, mainly as a result of the Verdant acquisition, higher legal expenses and an increase in salaries and related costs, including as a result of the Verdant acquisition.

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 and six months ended December 31, 2025, our Securities Business Segment had income before income taxes of $9.7 million and $18.0 million, respectively, compared to income before income taxes of $7.8 million and $16.9 million, respectively, for the three and six months ended December 31, 2024.

For the three and six months ended December 31, 2025, net interest income increased $1.6 million, or 23.3%, and $2.6 million, or 17.9%, respectively, compared to net interest income for the three and six months ended December 31, 2024. The increases for the three and six months ended December 31, 2025 were primarily attributable to higher broker-dealer interest income on higher average balances.

For the three and six months ended December 31, 2025, non-interest income increased $1.2 million, or 4.0%, and $0.7 million, or 1.2%, respectively, compared to the three and six months ended December 31, 2024. The increases were primarily driven by higher advisory fee income.

For the three and six months ended December 31, 2025, non-interest expense increased $0.9 million or 3.3%, and $2.2 million, or 3.9%, respectively, compared to the three and six months ended December 31, 2024. The increases primarily reflect higher data and operational processing expenses.

The following table provides selected information for Axos Clearing: