Axos Financial Q3 FY26 earnings call AX

Axos Financial successfully acquired approximately $2.3 billion in online savings deposits from Jenius Bank, with regulatory approval received and conversion expected next month. Additionally, the company announced a separate acquisition of approximately $3.2 billion of IRA savings and CDs from Capital One, with a bank merger application submitted and conversion anticipated in the second half of calendar 2026. These opportunistic acquisitions are intended to provide incremental liquidity and funding for future organic and inorganic loan growth opportunities.

The consolidated net interest margin was 4.57% for the quarter, down from 4.94% in the prior quarter. Excluding the impact of FDIC-purchased loan prepayments and fewer days, NIM was down approximately 10 basis points linked quarter, in line with prior guidance. The positive impact from FDIC-purchased loan accretion has diminished to around 5 basis points. Management expects reported NIM to remain roughly flat organically, excluding a 5 basis point impact from the Jenius Bank deposit purchase premium.

The credit quality of the loan book remains strong with low historic and current charge-offs. Net charge-offs were 31 basis points for the quarter, primarily driven by a $14 million charge-off on a C&I cash flow loan that had a specific reserve allocated previously. Excluding this, NCOs were 8 basis points. Total nonperforming assets decreased by $5 million year-over-year to $180.4 million, representing 62 basis points of total assets. A new syndicated C&I shared national credit became delinquent, increasing C&I nonperforming assets by $33 million.

Axos continues to expand the use of artificial intelligence across the firm, with over 500 team members using Claude Enterprise to improve workflow speed and productivity. The number of technical AI users increased by 37% since the beginning of calendar 2026, with AI's share of committed code reaching 90%. These initiatives are contributing to benefits in salaries and benefits, data processing, and other G&A expenses, reflecting the company's focus on scaling AI tools across more use cases.

The company generated almost $700 million in net loan growth linked quarter, with strong performance in capital calls, real estate lender finance, and equipment finance. Total originations for investment were $5.1 billion. The diversity of lending channels, including Verdant Equipment Leasing, commercial specialty real estate, fund finance, and rebounding jumbo single-family and multifamily pipelines, provides flexibility for sustained loan and deposit growth, with an expectation of low to mid-teens annual growth.

Noninterest income was $86 million, significantly up from $53 million in the prior quarter. This increase was driven by a $22 million one-time^📎 legal settlement, higher mortgage banking income (due to a favorable servicing rights fair value adjustment), increased advisory fees, and rental income from a newly purchased commercial office building. Verdant contributed $23.7 million to noninterest income, up from $18.9 million sequentially, highlighting diversified fee generation.