COMMITMENTS AND CONTINGENCIES

3 Months Ended

Sep. 30, 2023

Commitments and Contingencies Disclosure [Abstract]

Operating Leases. The Company leases office space under operating lease agreements scheduled to expire at various dates. The following table represents maturities of lease liabilities as of September 30, 2023:


(Dollars in thousands)	As of September 30, 2023
Within one year	$	11,635
After one year and within two years	11,833
After two years and within three years	11,409
After three years and within four years	11,504
After four years within five years	9,869
After five years	17,841
Total lease payments	74,091
Less: amount representing interest	(6,847)
Total lease liability	$	67,244

Credit-Related Financial Instruments. The Company is a party to credit-related financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are commitments to extend credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the unaudited condensed consolidated balance sheets.

The Company’s exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

At September 30, 2023, the Company had unfunded commitments to originate $99.0 million million in fixed rate loans and $3,119.3 million million in variable rate loans, totaling an aggregate outstanding principal balance of $3,218.3 million million. For September 30, 2023, the Company’s fixed rate commitments to originate had a weighted-average rate of 8.44%. At September 30, 2023, the Company also had fixed rate commitments to sell loans with an aggregate outstanding principal balance of $13.2 million. At September 30, 2023, 36.0% of the commitments to originate loans are matched with commitments to sell related to conforming single family loans classified as held for sale, respectively.

Commitments to extend credit are agreements to lend to a customer so long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management’s credit evaluation of the customer.

In the normal course of business, Axos Clearing LLC.’s (“Axos Clearing”) customer activities involve the execution, settlement, and financing of various customer securities transactions. These activities may expose Axos Clearing to off-balance-sheet risk in the event the customer or other broker is unable to fulfill its contracted obligations and Axos Clearing has to purchase or sell the financial instrument underlying the contract at a loss. Axos Clearing’s clearing agreements with broker-dealers for which it provides clearing services requires them to indemnify Axos Clearing if customers fail to satisfy their contractual obligation.

Litigation. A consolidated derivative action, In re BofI Holding, Inc., Case No. 15cv2722 GPC (KSC), is pending before the United States District Court for the Southern District of California (the “Derivative Action”). The complaint in the Derivative Action sets forth allegations made in a related employment action, Erhart v. BofI Holding Inc., No. 15cv2287 BAS (NLS) (S.D. Cal.) (the “Employment Action”) brought by a former employee of the Company. The Derivative Action plaintiff seeks damages on behalf of the Company should an adverse judgment be entered in the Employment Action, and also seeks damages on behalf of the Company in connection with a now settled securities class action that was also based upon allegations made in the Employment Action and settled within available insurance coverage without attribution of wrongdoing to the Company, its management, or its directors. The Derivative Action has been stayed pending resolution of the Employment Action.

On October 26, 2022, a jury verdict was reached in the case of MUFG Union Bank, N.A. v. Axos Bank, et al, awarding damages to Union Bank. Judgment on such verdict was initially entered on June 5, 2023, and a corrected judgment was entered on June 20, 2023. The Company filed a Notice of Appeal on July 6, 2023, and the plaintiff filed a Notice of Cross-Appeal on July 20, 2023. The Company recorded a $16 million accrued expense in “Accounts payable and other liabilities” on the condensed consolidated balance sheet and in “General and administrative expense” on the condensed consolidated statement of income as of and for the year ended June 30, 2023, respectively. Given the uncertainty of the appellate process and other factors that are unknown or currently unquantifiable, the Company maintained its accrual at September 30, 2023.

In view of the inherent difficulty of predicting the outcome of each legal action it is not possible to reasonably predict or estimate the eventual loss or range of loss, if any, related to each legal action.