Axos Financial NYSE: AX reported fiscal third-quarter 2026 results highlighted by what management described as broad-based loan growth, a sizeable jump in non-interest income, and continued strong profitability metrics. The quarter ended March 31, 2026 also included notable items such as a one-time legal settlement and continued progress on deposit acquisitions expected to bolster future funding capacity.
Profitability and balance sheet growth
President and CEO Greg Garrabrants said the company delivered “another quarter of double-digit year-over-year growth in net interest income, ending loan and deposit balances, earnings per share, and book value.” Axos generated “almost $700 million in net loan growth” on a linked-quarter basis, which management said contributed to an 11.2% year-over-year increase in net interest income.
Garrabrants said Axos posted “over 16% return on average common equity and 1.8% return on assets” for the three months ended March 31, 2026. Net income was approximately $124.7 million, up 18.5% from $105.2 million in the prior-year quarter. Diluted EPS was $2.15, compared with $1.81 a year earlier, an 18.7% increase.
Loan growth was described as strong across several lines, including capital calls, real estate lender finance, and equipment finance, while single-family warehouse balances had a seasonal decline of approximately $123 million. Garrabrants said ending loan balances grew by roughly $800 million linked quarter, excluding single-family warehouse.
Net interest margin trends and loan yields
Axos’ net interest margin (NIM) was 4.57% for the March quarter, down from 4.94% in the prior quarter. Garrabrants attributed part of the quarter-over-quarter change to dynamics in FDIC-purchased loans, noting that the accretion benefit has “now dwindled to around 5 basis points of positive impact.” Excluding the impact from prepayments of FDIC-purchased loans and the effect of having two fewer days in the quarter, management said margin declined in line with prior guidance of around 10 basis points.
Average loan yields from non-purchased loans were 7.23%, down from 7.63% in the prior quarter. Garrabrants said the sequential decline was “driven primarily by the full impact from the two 25 basis point rate cuts” in calendar fourth quarter 2025. Purchased loan yields were 12.39% versus 23.32% in the December quarter, which management said had benefited from the payoff of one FDIC-purchased loan and approximately $17 million of purchase discount accretion recognized in interest income.
Asked about the impact of temporary borrowings on margin, CFO Derrick Walsh said it was “maybe a basis point or two,” adding that Axos largely replaced higher-cost deposits with other funding and did not see a meaningful margin effect. Garrabrants also said the company is not focused on “optimiz[ing]…a few basis points here or there on NIM” as it onboards Jenius Bank customers, and reiterated expectations that NIM will be “flattish going forward” aside from about 5 basis points of amortization tied to the deposit premium.
On competitive conditions, Garrabrants said spreads appear stable, adding that “to the extent that there was compression…that compression has stopped,” and he does not anticipate further spread compression.
Non-interest income surged, aided by settlement and rental revenue
Non-interest income totaled $86 million, up from $53 million in the prior quarter and $33.4 million in the year-ago quarter. Garrabrants said results included a $22 million one-time favorable legal settlement; excluding that, he said non-interest income rose by roughly $10 million linked quarter on higher mortgage banking income, advisory fees, and rental income tied to an office building purchased in January 2026 for Axos’ future headquarters.
Management detailed several components behind the quarter’s fee performance:
- Mortgage banking income of $3.7 million, up $2.2 million year-over-year, driven by a favorable mortgage servicing rights fair value adjustment, according to Garrabrants.
- Advisory fee income of $9.4 million, up $1.3 million year-over-year.
- Verdant contribution of approximately $23.7 million in non-interest income, up from $18.9 million in the December quarter.
- Rental income related to the headquarters property acquisition, which Walsh said contributed roughly $4 million to fee income, alongside $2 million to $3 million of corresponding depreciation and other expense recorded in non-interest expense.
Expenses, taxes, and credit quality
Non-interest expenses were approximately $186 million, up $1.4 million linked quarter. Walsh said salaries and benefits declined $0.6 million sequentially, while professional services rose $1.6 million and FDIC and regulatory fees increased $1.6 million due primarily to fiscal year-to-date loan and deposit growth. Both Garrabrants and Walsh pointed to operational initiatives and increased use of AI tools as contributing to productivity gains.
The effective tax rate was 24.6% for the quarter, down from 26.8% in the prior quarter. Walsh said the decline was primarily tied to benefits from restricted stock unit vestings and certain tax credits. He added Axos expects an annual tax rate of roughly 26% to 27% excluding potential future tax credit benefits.
Provision for credit losses increased to $41 million from $25 million in the prior quarter. Walsh said the quarter-over-quarter increase was primarily driven by a specific reserve of approximately $20 million for a C&I loan, and he said the company expects to maintain a reserve level of about 1.3% to 1.4% of total loans and leases going forward.
Garrabrants said net charge-offs were 31 basis points, compared to 9 basis points in the year-ago quarter, and included a $14 million charge-off on a C&I cash flow loan that had been on non-accrual for over a year. He said the remaining principal balance on that loan was about $17 million at March 31, with a $10 million specific reserve maintained against it. Excluding that charge-off, he said net charge-offs were $5.1 million, or 8 basis points annualized.
Total non-performing assets were $180.4 million, down about $5 million from the year-ago quarter. Garrabrants said non-performing assets declined by approximately $27 million in multifamily and by $19 million in commercial mortgages, while a syndicated C&I shared national credit became delinquent, contributing a $33 million sequential increase in C&I non-performing assets. Garrabrants said Axos has taken over as agent on that syndicated loan and is “actively working to resolve” it, with the outcome expected to become clearer “over the next several quarters.” Walsh said there was no significant impact from reversing interest on that credit during the quarter.
Deposits, acquisitions, and outlook
Ending deposits were $22.4 billion, up 11.2% year-over-year, with demand, money market, and savings accounts representing 97% of total deposits and increasing 13% year-over-year. Non-interest-bearing deposits were approximately $3.4 billion, up $143 million from the prior quarter. Garrabrants said Axos deliberately reduced higher-cost savings and time deposits and temporarily increased Federal Home Loan Bank advances in anticipation of Jenius Bank deposits expected to come in the June quarter.
On acquisitions, Garrabrants said Axos received regulatory approval for its announced purchase of about $2.3 billion of online savings deposits from Jenius Bank and expects to complete deposit conversion and client onboarding “next month.” He also said the company announced a separate deposit acquisition of approximately $3.2 billion of IRA savings and CDs from Capital One, for which Axos submitted its bank merger application and is working toward a potential close in the second half of calendar 2026.
Walsh provided an update on liquidity management, explaining that Axos moved about $750 million into Treasuries during a market “dislocation” and hedged them with SOFR swaps, which he said improved returns versus holding cash at the Federal Reserve while maintaining liquidity.
On growth expectations, Garrabrants said Axos is “confident” it will generate loan growth in the low-to-mid teens on an annual basis this year. Walsh said the loan pipeline totaled approximately $2.6 billion as of April 24, 2026, including $611 million of SFR jumbo mortgages and $1.7 billion across the commercial portfolio, and reiterated expectations for low-to-mid teens organic loan growth over the next year, excluding acquisitions.
About Axos Financial NYSE: AX
Axos Financial, Inc NYSE: AX is a diversified online banking and financial services holding company headquartered in San Diego, California. The firm traces its origins to 1999 with the launch of Bank of Internet USA and rebranded as Axos Financial in December 2018 to reflect an expanded suite of digital offerings. Axos Financial operates through its wholly owned subsidiary, Axos Bank, providing a technology-driven banking platform that serves both retail and commercial clients across the United States.
Through its digital banking platform, Axos Financial delivers a range of deposit products, including checking and savings accounts, money market and certificate of deposit accounts, as well as individual retirement accounts.
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