AX — Axos Financial, Inc.

Summary of Axos Bank Q3 2026 Earnings Call

1. Key Financial Results and Metrics

• Net Income: $124.7 million, up 18.5% year-over-year from $105.2 million.
• Earnings Per Share (EPS): $2.15, an increase of 18.7% compared to $1.81 in Q3 2025.
• Net Interest Income: Grew by 11.2% year-over-year, with a linked quarter increase of $5.7 million, excluding FDIC-purchased loans.
• Net Interest Margin (NIM): 4.57%, down from 4.94% in the previous quarter, attributed to the diminishing impact of FDIC-purchased loans.
• Loan Growth: Approximately $700 million linked quarter growth, with ending loan balances up $800 million, excluding single-family warehouse loans.
• Noninterest Income: $86 million for the quarter, significantly up from $53 million in the prior quarter, driven by higher mortgage banking income and a $22 million legal settlement.
• Return on Average Common Equity: Over 16%.
• Return on Assets: 1.8%.
• Nonperforming Assets: $180.4 million, down from $185 million year-over-year.

2. Strategic Updates and Business Highlights

• Acquisitions: Completed the acquisition of Jenius Bank deposits worth approximately $2.3 billion, enhancing liquidity and funding for future growth. A separate acquisition of $3.2 billion in IRA savings and CDs from Capital One is in progress.
• Operational Efficiency: Continued focus on operational efficiency initiatives and artificial intelligence, leading to reduced expenses in salaries, benefits, and general administrative costs.
• Verdant Performance: Strong contribution of approximately $200 million in new loans and operating leases, with ongoing efforts to deepen relationships with existing vendors.
• AI Integration: Over 500 team members are utilizing AI tools to enhance productivity across various workflows.

3. Forward Guidance and Outlook

• Loan Growth: Expected to achieve low to mid-teens annual loan growth, driven by a robust loan pipeline of approximately $2.6 billion.
• NIM Stability: Anticipated to remain flat on an organic basis, with a slight impact from the amortization of deposit acquisition premiums.
• Credit Loss Provisions: Projected to maintain a loan loss reserve of approximately 1.3% to 1.4% of total loans and leases.

4. Bad News, Challenges, or Points of Concern

• Credit Quality: Net charge-offs increased to 31 basis points, up from 9 basis points year-over-year, primarily due to a specific reserve for a nonaccrual C&I loan.
• Pressure on NIM: Decline in net interest margin due to the impact of FDIC-purchased loans and increased borrowings, although management indicated expectations of stability moving forward.
• Market Volatility: The stock market decline affected asset growth under custody administration, indicating potential challenges in maintaining fee income.

5. Notable Q&A Insights

• Balance Sheet Management: Management discussed strategic moves to increase securities holdings to improve yield, indicating a proactive approach to liquidity management ahead of the Jenius acquisition.
• Loan Pipeline Dynamics: Emphasis on acquiring new clients rather than significant drawdowns from existing clients in the capital call segment, suggesting a focus on sustainable growth.
• Competitive Landscape: Management noted stable spreads in loan yields, with no significant further compression expected, indicating a favorable competitive environment for loan pricing.
• M&A Opportunities: Ongoing evaluation of various M&A opportunities, including teams, fintechs, and banks, reflecting a disciplined approach to growth through strategic acquisitions.

Overall, Axos Bank demonstrated strong financial performance in Q3 2026, with significant growth in net income and strategic initiatives aimed at enhancing operational efficiency and expanding its market presence, despite some challenges related to credit quality and net interest margin pressures.