Axos Financial, Inc. (AX) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A indicate solid financial performance and strategic growth plans. Loan growth projections, AI deployment, and M&A opportunities signal optimism. The Q&A reveals minimal negative sentiment, with stable NIM and strategic deposit growth. Despite some uncertainties in fee income growth and NIM impact, the overall sentiment remains positive. The market cap suggests moderate stock price movement, likely resulting in a 2% to 8% increase over the next two weeks.
Key Financial Performance
Net Loan Growth Almost $700 million in net loan growth linked quarter, resulting in an 11.2% year-over-year increase in net interest income. The growth was driven by strong performance across lending businesses.
Net Interest Income Increased by 11.2% year-over-year. Excluding the interest income impact of FDIC-purchased loans and 2 fewer days in the quarter, net interest income increased by $5.7 million on a linked quarter basis.
Return on Average Common Equity Over 16% for the 3 months ended March 31, 2026, indicating high returns.
Return on Assets 1.8% for the 3 months ended March 31, 2026, reflecting strong asset performance.
Noninterest Income $86 million for the quarter ended March 31, 2026, up from $33.4 million in the corresponding quarter a year ago. Excluding a $22 million legal settlement, noninterest income was up approximately $10 million linked quarter due to higher mortgage banking income, advisory fees, and rental income from a newly purchased commercial office building.
Net Interest Margin 4.57% for the quarter ended March 31, 2026, compared to 4.94% in the prior quarter. The decline was in line with guidance and impacted by prepayments of FDIC-purchased loans and fewer days in the quarter.
Noninterest Expenses $186 million for the 3 months ended March 31, 2026, up $1.4 million linked quarter. The increase was driven by professional services fees and FDIC and regulatory fees, partially offset by operational efficiency initiatives and AI implementation.
Net Income Approximately $124.7 million for the quarter ended March 31, 2026, up 18.5% from $105.2 million in the prior year's third quarter. The increase was driven by strong loan growth and operational efficiency.
Diluted EPS $2.15 for the quarter ended March 31, 2026, compared to $1.81 in the third quarter of 2025, representing an 18.7% year-over-year increase.
Ending Loan Balances Grew by approximately $800 million linked quarter, excluding single-family warehouse lending. Growth was driven by capital calls, real estate lender finance, and equipment finance.
Ending Deposit Balances $22.4 billion, up 11.2% year-over-year. Demand, money market, and savings accounts represent 97% of total deposits, which increased by 13% year-over-year.
Noninterest-Bearing Deposits Approximately $3.4 billion for the quarter ended March 31, 2026, an increase of $143 million from the prior quarter. The increase was due to a deliberate reduction in higher-cost savings and time deposits.
Mortgage Banking Income $3.7 million for the quarter ended March 31, 2026, up $2.2 million year-over-year due to a favorable servicing rights fair value adjustment.
Advisory Fee Income $9.4 million, up $1.3 million year-over-year, driven by higher advisory activities.
Net Charge-Offs 31 basis points for the quarter ended March 31, 2026, compared to 9 basis points in the year-ago quarter. The increase was primarily due to a $14 million charge-off of a C&I cash flow loan.
Nonperforming Assets $180.4 million at the end of the quarter, down approximately $5 million from the prior year. Declines were seen in multifamily and commercial mortgages, offset by an increase in a syndicated C&I loan.
Allowance for Credit Losses to Nonaccrual Loans 192.2% at March 31, 2026, reflecting strong reserves for credit losses.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Verdant Equipment Leasing acquisition: Continues to perform well with good progress across strategic and operational initiatives. Loan growth remains healthy and profitability continues to improve.
Artificial Intelligence (AI) implementation: AI tools are being scaled across the firm, with over 500 team members using Claude Enterprise to improve workflows. AI's share of committed code has increased to 90%, and technical users have grown by 37% since the beginning of 2026.
Acquisition of Jenius Bank deposits: Axos acquired approximately $2.3 billion of online savings deposits from Jenius Bank, with regulatory approval received and client onboarding expected next month.
Acquisition of Capital One IRA savings and CDs: Axos announced the acquisition of $3.2 billion of IRA savings and CDs from Capital One, with the transaction expected to close in the second half of 2026.
Operational efficiency initiatives: Benefits observed in salaries, benefits, data processing, and G&A expenses. AI tools have contributed to increased productivity.
Loan growth: Strong growth across lending businesses, including capital calls, real estate lender finance, and equipment finance. Loan pipelines in newer verticals like floor plan and retail marine lending are growing.
M&A opportunities: Axos is actively reviewing M&A opportunities in the banking and fintech landscape to augment growth.
Strategic advantage in lending: The synergy between Verdant and non-marine floor plan lending teams is gaining traction, providing a comprehensive retail and wholesale lending solution to top-tier manufacturers.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Net Interest Margin Decline: The net interest margin decreased from 4.94% in the prior quarter to 4.57% in the current quarter, with further potential declines expected due to diminishing impact from FDIC-purchased loans.
Nonperforming Assets: Nonperforming assets totaled $180.4 million, with a $33 million sequential increase in the C&I loan area due to a syndicated loan becoming delinquent. This poses a risk to asset quality.
Credit Loss Provisions: Provision for credit losses increased to $41 million from $25 million in the prior quarter, driven by a specific reserve of approximately $20 million for a C&I loan, indicating potential credit quality concerns.
Loan Charge-Offs: Net charge-offs increased to 31 basis points compared to 9 basis points in the prior year, including a $14 million charge-off related to a C&I cash flow loan.
Regulatory and FDIC Fees: FDIC and regulatory fees increased by $1.6 million quarter-over-quarter, reflecting higher costs associated with loan and deposit growth.
Economic and Market Volatility: Market volatility impacted cash sorting deposit balances and stock market-related assets under custody, which remained flat despite net new asset growth.
Integration Risks from Acquisitions: The company is integrating $2.3 billion of deposits from Jenius Bank and $3.2 billion of IRA savings and CDs from Capital One, which could pose operational and strategic risks.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Loan Growth: The company expects low to mid-teens organic loan growth in the next year, excluding potential acquisitions. This growth will be driven by broad-based growth across several lending businesses.
Deposit Growth and Utilization: The company plans to deploy deposits from the Jenius Bank acquisition to reduce temporary borrowings and fund strong loan growth. Additionally, the acquisition of $3.2 billion of IRA savings and CDs from Capital One is expected to close in the second half of 2026, providing incremental liquidity and funding for future growth.
Net Interest Margin: Reported net interest margin is expected to stay roughly flat on an organic basis, excluding the impact of the deposit purchase premium from acquired deposits, estimated to be around 5 basis points.
M&A Opportunities: The company is actively reviewing M&A opportunities within the banking and fintech landscape to augment growth from existing businesses.
Artificial Intelligence Implementation: The company is scaling the use of artificial intelligence across various workflows, with over 500 team members using AI tools to improve productivity. This initiative is expected to enhance operational efficiency and scalability.
Tax Rate: The company expects to maintain an annual tax rate of approximately 26% to 27%, excluding potential benefits from tax credit opportunities.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
The selected topic was not discussed during the call.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What caused the increase in securities balances this quarter?
A:The increase in securities balances was due to a dislocation in the marketplace identified in October and November, where buying treasuries in 3-, 5-, 7-year tenures and hedging them with a SOFR swap generated a 30 basis points improvement over holding cash at the Federal Reserve. Approximately $750 million was moved into these securities.
Q:What contributed to the growth in capital call this quarter?
A:The growth in capital call was driven by the addition of quite a few new clients rather than significantly greater drawdowns. The lines brought on tend to take a few quarters to reach their typical levels. While the growth may not be as significant next quarter, it is expected to remain decent.
Q:What drove the increase in the allowance quarter-over-quarter?
A:The increase in the allowance was primarily driven by the C&I nonaccrual addition in the quarter. There was also a minor impact from broader economic and geopolitical events reflected in the Moody's variables and the quantitative model.
Q:Can you provide additional details on the C&I nonaccrual credit?
A:The C&I nonaccrual credit was a syndicated shared national credit where the company was not the agent. The agent had made early concessions, and now the company is the agent working with the sponsor. The credit was put on nonaccrual, and a significant reserve was taken against it. The resolution is expected to become clearer over the next several quarters.
Q:What was the impact of temporary borrowings on NIM this quarter?
A:Temporary borrowings had a minimal impact on NIM, contributing only about 1-2 basis points. The company replaced higher-cost deposits with these borrowings, which did not significantly affect NIM.
Q:How will the Jenius acquisition affect NIM?
A:The Jenius acquisition is expected to be helpful from a volume perspective, but the company does not plan to optimize NIM by adjusting pricing immediately. NIM is expected to remain flattish going forward, with a 5 basis points amortization of the premium.
Q:How will the Capital One deposits impact funding and NIM?
A:The Capital One deposits will ensure funding for loan growth without the need to increase deposit pricing or marketing budgets. While it may help maintain NIM, no significant increase in NIM is expected solely due to these deposits.
Q:Will there be a build in liquidity due to the Jenius and Capital One deposits?
A:There might be a slight liquidity build in fiscal Q4 due to the Jenius deposits, but the balance sheet has been strategically positioned for growth. A more significant balance sheet growth might occur in late 2026 or early 2027 due to the Capital One deposits.
Q:What is the outlook for fee income growth from the Verdant acquisition?
A:Fee income growth from the Verdant acquisition is expected to align with forecasted loan growth. Operating leases account for about 1/6 of originations, and while fee income should generally grow, no significant increase is expected.
Q:Are there opportunities to cross-sell securities products to Capital One clients?
A:Yes, there are opportunities to cross-sell securities products to Capital One clients, especially since these are retirement accounts with limited product types currently offered. Over time, these clients could become more general banking clients.
Q:What are the trends in core noninterest income?
A:Core noninterest income growth was driven by rental income from the future headquarters, mortgage banking increases, and incremental growth in advisory, broker-dealer, and general banking service fees.
Q:Where is the most opportunity for M&A today?
A:The company sees opportunities in team acquisitions, fintechs with complementary business models, banks (large and small), and specialty finance. They maintain a disciplined approach, building relationships over time to ensure a good fit.
Q:Why did average loan balances barely grow this quarter?
A:Average loan balances grew by $1.15 billion, but early prepayments in January counteracted some of the growth. The company also reduced excess cash, which impacted average balances.
Q:How are loan spreads and competition faring?
A:Loan spreads are stable, with no further compression expected. Some private credit outflows have created a slightly positive competitive dynamic, and the company's mix of lending, including higher-spread Verdant lending, helps maintain spreads.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the expected fee income growth from the Verdant acquisition, stating that it is tough to predict and depends on opportunities and accounting nuances. Additionally, they did not provide a clear forecast for the impact of the Capital One deposits on NIM, emphasizing that it would not significantly increase NIM but would help maintain it.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI tool
Bank deposit
CI loan
Capital
Jenius Bank
Loan
Senior Vice
addition income
advisory
agent
balance family
banking income
calendar
commercial
conversion
credit loss
day interest
decline
deposit acquisition
deposit increase
estate lender
family warehouse
income FDIC
income office
loan day
loan deposit
loan lease
loan loss
loss reserve
member
opportunity capital
productivity
rate benefit
reserve balance
saving deposit
scale
service fee
settlement
tax credit
tax rate
week
AX Transcript
Axos Financial, Inc. (AX) Q3 2026 Earnings Call Transcript
Positive4-30
The earnings call summary and Q&A indicate solid financial performance and strategic growth plans. Loan growth projections, AI deployment, and M&A opportunities signal optimism. The Q&A reveals minimal negative sentiment, with stable NIM and strategic deposit growth. Despite some uncertainties in fee income growth and NIM impact, the overall sentiment remains positive. The market cap suggests moderate stock price movement, likely resulting in a 2% to 8% increase over the next two weeks.
Axos Financial, Inc. (AX) Q2 2026 Earnings Call Transcript
Positive1-29
The earnings call presents strong financial performance, with significant growth in net income, originations, and deposits. Although expenses rose, they were mainly due to one-time factors. The Verdant acquisition is positively impacting growth and earnings. While the Q&A revealed some management evasiveness, the overall sentiment remains positive due to strong financial metrics, optimistic guidance, and strategic partnerships like Qualia. The market cap suggests moderate sensitivity, leading to a positive stock price prediction (2% to 8%) over the next two weeks.
Axos Financial, Inc. (AX) Q1 2026 Earnings Call Transcript
Positive10-30
The earnings call reflects a positive outlook with strong financial performance, including a 44% annualized growth, reduced nonperforming assets, and increased assets under custody. The Q&A session highlights a cautious but strategic approach to risk management and capital allocation, supporting growth. The company's focus on technology and operational investments, along with a healthy loan pipeline, further bolsters confidence. Despite some lack of detail on acquisitions, the overall sentiment is positive, suggesting a likely stock price increase of 2% to 8% in the next two weeks.
Axos Financial Inc. (AX) Q4 2025 Earnings Call Transcript
Positive7-31
The earnings call suggests a generally positive outlook with strong net loan growth, effective cost management through AI, and a stable net interest margin. The Q&A section confirms stable credit quality and growth opportunities, despite some pricing pressures. The stock repurchase and strategic investment in technology further bolster the positive sentiment. The market cap indicates a moderate reaction, leading to a 'Positive' prediction of 2% to 8% stock price increase.
AX Slides
AX Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
