AX — Axos Financial, Inc.

Axos Bank Q3 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Income: $124.7 million, up 18.5% year-over-year from $105.2 million.
• Diluted EPS: $2.15, an increase of 18.7% from $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: 4.57%, down from 4.94% in the prior quarter, reflecting a decline in average loan yields.
• Noninterest Income: $86 million, significantly up from $53 million in the prior quarter, driven by a $22 million legal settlement and increased mortgage banking income.
• Loan Growth: Approximately $700 million linked quarter growth, with total originations of $5.1 billion.
• Deposits: Ending balances at $22.4 billion, up 11.2% year-over-year.

2. Strategic Updates and Business Highlights

• Acquisitions: Completed the acquisition of Jenius Bank's $2.3 billion in deposits, with a second acquisition of $3.2 billion in IRA savings and CDs from Capital One underway.
• Operational Efficiency: Benefits from AI initiatives are being realized in reduced operational costs, particularly in salaries and benefits.
• Verdant Performance: Contributed approximately $200 million in new loans and operating leases, with ongoing efforts to deepen relationships and expand growth.
• Credit Quality: Remains strong with low charge-offs of 31 basis points, although there was a specific reserve increase related to a C&I loan.

3. Forward Guidance and Outlook

• Loan Growth Expectation: Anticipated low to mid-teens annual loan growth, supported by a robust pipeline of approximately $2.6 billion.
• Net Interest Margin Outlook: Expected to remain flat on an organic basis, with a slight impact from the amortization of the premium from acquired deposits.
• M&A Strategy: Actively exploring opportunities across various sectors, including fintech and specialty finance, with a disciplined approach to integration.

4. Bad News, Challenges, or Points of Concern

• Declining Net Interest Margin: The margin decreased due to lower average loan yields and the diminishing impact of FDIC-purchased loans.
• Increased Provision for Credit Losses: Rose to $41 million from $25 million, primarily due to a specific reserve for a nonaccrual C&I loan.
• Nonperforming Assets: Increased by $33 million in the C&I loan area, raising concerns about credit quality in that segment.
• Market Volatility: The impact of market fluctuations on asset growth and client acquisition was noted, with some pressure on fee income.

5. Notable Q&A Insights

• Balance Sheet Management: Management discussed strategic moves to increase securities holdings to optimize liquidity ahead of the Jenius acquisition.
• Loan Growth Sustainability: New client acquisitions were highlighted as a key driver for capital call growth, with expectations for continued but moderated growth.
• Competitive Landscape: Management expressed confidence in maintaining stable spreads despite competitive pressures, attributing it to a diversified loan portfolio.
• Cross-Selling Opportunities: Potential for cross-selling securities products to new Capital One clients was identified, with a focus on expanding offerings to retirement accounts.

Overall, Axos Bank reported strong financial performance in Q3 2026, with significant growth in net income and deposits, while navigating challenges related to net interest margin and credit quality. The company remains focused on strategic acquisitions and operational efficiencies to support future growth.