What Axos Financial (AX) Said on Its Q1 Earnings Call

Key Points

• Strong quarterly performance: Axos Financial’s net income rose 15.4% year over year to $129.6 million, while diluted EPS increased 16% to $2.25. Net interest income, fee revenue, deposits, loans and book value per share also grew.
• Growth outlook remains positive: Management expects low- to mid-teens organic loan growth in fiscal 2027, supported by a $2.8 billion loan pipeline and recently acquired Capital One IRA deposits. However, excess liquidity from the acquisition may temporarily pressure net interest margin.
• Credit quality was broadly stable: Higher net charge-offs reflected two previously reserved commercial loans; excluding those credits, annualized net charge-offs remained low at 8 basis points. The company also repurchased $14 million of stock during and shortly after the quarter and plans to introduce Bitcoin trading around March 2027.

Axos Financial NYSE: AX reported higher first-quarter fiscal 2027 earnings as net interest income, fee revenue, loans, deposits and book value per share increased from a year earlier. The company also said it expects to generate low- to mid-teens organic loan growth for the fiscal year ending June 30, 2027, supported by a $2.8 billion loan pipeline and recently acquired deposit balances.

Net income for the quarter ended Sept. 30, 2026, rose 15.4% year over year to $129.6 million. Diluted earnings per share increased 16% to $2.25 from $1.94 in the prior-year quarter.

President and CEO Greg Garrabrants said the company’s core business fundamentals remained strong, citing double-digit year-over-year growth in net interest income, non-interest income, ending loan and deposit balances, earnings per share and book value per share.

Margin expands while Capital One deposits add liquidity

Net interest income rose 4.2% from the preceding quarter and 13.8% from a year earlier. Net interest margin expanded 10 basis points sequentially to 4.64%, while average loan yields increased 11 basis points from the prior quarter to 7.48%.

Axos closed its acquisition of Capital One IRA deposits on Sept. 21, adding approximately $1.8 billion, split evenly between savings deposits and time deposits. The company used a portion of those funds to reduce wholesale and other non-core deposits, and it expects to deploy most of the remaining excess liquidity by the end of calendar 2026.

Chief Financial Officer Derrick Walsh said excess cash from the Capital One acquisition would represent roughly $700 million in average assets during the December quarter and create a near-term drag on net interest margin because it earns less than the company’s loan portfolio. He said net interest income is still expected to expand in the upcoming quarter, while the margin percentage is expected to remain relatively flat.

Garrabrants said Axos expects net interest margin to stay flat over the next several quarters. About 75% of the company’s loans are floating-rate and reprice within 30 days or less following index-rate changes, though management expects deposit repricing to offset a significant portion of margin benefits from potential future rate increases beginning in the March 2027 quarter.

Ending deposits increased 14% year over year to $25.4 billion. Demand, money market and savings accounts represented about 94% of total deposits. Non-interest-bearing deposits totaled approximately $3.6 billion, down from $3.8 billion at the end of June, primarily reflecting lower client cash sorting deposits at Axos Securities.

Loan balances rise despite elevated payoffs and syndications

Ending loan balances reached $25.9 billion, an increase of $316.6 million from the prior quarter. The company said strong loan originations were partly offset by elevated payoffs in single-family mortgage and warehouse, multifamily, and small-balance commercial real estate lending.

Axos originated $5.7 billion of loans for investment, excluding single-family warehouse lending, compared with $4.2 billion in the first quarter of fiscal 2026. Growth was strongest in commercial real estate specialty lending, real estate lender finance, equipment finance and auto lending.

Capital call loan balances fell $345 million during the quarter, largely because Axos syndicated more than $290 million of capital call originations before quarter-end. Excluding the capital call syndications, net loan balances increased by more than $600 million, Garrabrants said. Management expects capital call balances to resume growth in the December quarter.

The company’s loan pipeline totaled approximately $2.8 billion at quarter-end, including $1.7 billion of commercial loans, $782 million of jumbo single-family residential mortgages, $195 million of multifamily and small-balance commercial loans, and $71 million of auto and consumer loans.

Garrabrants said loan opportunities remained broad-based despite higher rates, although the company continues to see pressure in smaller-balance multifamily lending as buyers and sellers differ on property values. He also cited opportunities arising from disruption among equipment leasing and floor-plan finance competitors.

Credit losses reflect two reserved C&I loans

Net charge-offs rose to 109 basis points from 25 basis points in the prior quarter, driven by two nonperforming C&I loans for which Axos had established specific reserves in prior periods. Excluding those two charge-offs, annualized net charge-offs were 8 basis points of average loans and leases, compared with 9 basis points in the previous quarter excluding a separate specific credit charge-off.

Garrabrants said both charged-off credits were syndicated cash-flow loans with non-bank agents, and Axos held small portions of the loans. One involved a healthcare company affected by regulatory issues, while the other was affected by tariffs. The company said the loans were not charged off because of regulatory examination findings.

Axos reported that 99.2% of loans were current at Sept. 30. Total nonperforming assets declined slightly from June to $157.5 million, while loans 90 days or more past due declined 17% to 0.51% of loans. Classified loans fell about 19% from June.

The allowance for credit losses covered 196% of non-accrual loans. Walsh said the company expects to maintain its allowance in a range of 1.1% to 1.2% of total loans and leases.

Fee income, acquisitions and capital actions

Non-interest income rose 97% year over year to $63.8 million. Banking and service fees increased to $35.2 million from $10.8 million a year earlier, with the Verdant acquisition identified as the primary contributor. Prepayment penalty fees climbed to $6.8 million from $700,000 as commercial loan prepayments increased.

Axos Securities generated more than $10 million in broker-dealer fee income, while advisory fee income rose about 10% year over year. Assets under custody or administration increased $5 billion from a year earlier to $48 billion, and net new assets were approximately $195 million during the quarter.

Non-interest expense declined sequentially to $195.4 million from $206 million, though Walsh noted that the prior quarter included a $21 million legal accrual. Excluding that accrual, expenses increased about $10 million sequentially, reflecting additions from Arc Technologies, higher technology investments, and depreciation and amortization associated with acquisitions and infrastructure investments.

The company repurchased $7 million of common stock during the quarter at an average price of $86.92 per share, followed by another $7 million in repurchases through Oct. 23. Axos had approximately $112 million remaining under its share repurchase authorization.

Management also discussed plans to introduce Bitcoin trading through its self-directed brokerage platform around March 2027, initially in a beta rollout using a third-party custodian. Garrabrants said Axos plans to follow that launch with a Bitcoin lending program similar to a margin program before assessing whether to add other digital assets.

About Axos Financial (NYSE:AX)

Axos Financial, Inc is a financial holding company that operates primarily through Axos Bank, a nationwide digital bank. The company provides personal and business banking products, including checking and savings accounts, certificates of deposit, mortgage and home-equity loans, commercial lending, and other deposit and credit services. Its digital-first model allows customers to access accounts and financial services online and through mobile platforms.

Through its institutional businesses, Axos also provides securities clearing, custody, and related brokerage services to registered investment advisers, broker-dealers, and other financial institutions.

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