Axos Financial, Inc. Q3 FY2026 earnings call

• Generated double-digit year-over-year growth in net interest income, ending loan and deposit balances, earnings per share, and book value. • Net loan growth of almost $700 million link quarter, with 11.2% year-over-year increase in net interest income. Excluding certain impacts, net interest income increased by $5.7 million link quarter. • Net interest margin was 4.57% for the quarter, compared to 4.94% prior quarter, down in line with guidance. • Non-interest income was $86 million, up from prior quarters, with non-interest income excluding legal settlement up ~$10 million link quarter due to various factors. • Non-interest expenses up $1.4 million link quarter to $186 million, with benefits from operational efficiency initiatives and moderation in advertising expenses due to deposit acquisition. • Loan growth strong across multiple lending businesses, with loan pipelines rebounding in certain areas. • Verdant contributed to non-interest income growth. • Credit quality of loan book strong, but had net charge-offs and non-performing assets, with specific reserve for a CNI loan. • Expanding AI usage across the firm, with over 500 team members using Cloud Enterprise. • Announced acquisitions of deposits from Genius Bank and Capital One, with regulatory approvals and expected completions.

Net interest income saw double-digit year-over-year growth. Ending loan balances grew by ~$800 million link quarter, excluding single-family warehouse. Net interest margin was 4.57% for the quarter ended March 31, 2026, compared to 4.94% in the prior quarter. Non-interest income was $86 million for the quarter ended March 31, 2026, up from $53 million in the prior quarter and $33.4 million in the corresponding quarter a year ago. Ending deposit balances were $22.4 billion, up 11.2% year-over-year. Demand, money market, and savings accounts represent 97% of total deposits in March 31, increased by 13% year-over-year. Loan growth was strong across various lending businesses like Capital Calls, Real Estate Lender Finance, and Equipment Finance. Jumbo single-family loan balances were up slightly, while single-family warehouse had a seasonal decline. Average loan yields from non-purchased loans were 7.23% for the three months ended March 31, 2026, down from 7.63% in the prior quarter. Purchased loan yields were 12.39% compared to 23.32% in the December 31 quarter. New loan interest rates for the March quarter varied by portfolio. Non-interest-bearing deposits increased. Verdant contributed ~$23.7 million in non-interest income in the March quarter compared to $18.9 million in the December quarter. Net charge-offs were 31 basis points in the quarter ended March 31, 2026, compared to nine basis points in the year-ago quarter. Total non-performing assets were $180.4 million at the end of the quarter, down from $185 million in the prior year quarter.

• Expect reported net interest margin to stay roughly flat on an organic basis, excluding deposit purchase premium impact. • Confident of generating loan growth by the low to mid-teens on an annual basis this year. • Expect to maintain a loan loss reserve of approximately 1.3 to 1.4 percent of total loans and leases going forward. • Plan to use Genius Bank deposits to reduce temporary borrowings and fund strong loan growth.

• Credit risk related to the syndicated shared national credit loan that was put on non-accrual and has a specific reserve. • Regulatory and market dynamics could impact M&A opportunities and the execution of deposit acquisitions. • Fluctuations in interest rates could affect net interest margin and loan yields. • Volatility in the financial markets could impact assets under custody administration and other non-interest income components.

Q: Regarding balance sheet moving pieces like securities balances and FHLB stuff, how is the securities portfolio increase explained?

A: There was a dislocation in the marketplace where buying treasuries and hedging with SOFR swap generated 30 basis points improvement over holding cash at Fed Reserve, so ~$750 million moved into securities portfolio.

Q: On Capital Call growth, any color on new accounts vs bigger drawdowns?

A: Quite a few new clients, lines tend to take a few quarters to reach peak, growth likely to be decent but not as big as current quarter.

Q: On credit front, what drove the increase in provision for credit losses?

A: Primary driver was a specific reserve of ~$20 million for a CNI loan.

Q: Impact of temporary borrowings on NIM and reversal as Genius acquisition proceeds?

A: Maybe a basis point or two impact, but not too meaningful, and pending genius acquisition won't immediately adjust pricing significantly.

Q: View on Capital One deposits and their impact on funding and margin?

A: These deposits help ensure funding for loan growth, and won't significantly change NIM by pricing down other deposits immediately.

Q: Opportunity to cross-sell to Capital One clients?

A: There are opportunities, especially with retirement accounts as they have limited product types currently.

Q: Most opportunity for M&A and valuation rationality?

A: Looking at team acquisitions, fintechs, banks large and small, and specialty finance side, being disciplined and building relationships.

Q: Balance of loans throughout the quarter?

A: There were early prepaids during the quarter which counteracted some ending quarter growth, average balance grew by $1.15 billion of loans.

Q: Competition and loan yields direction?

A: Spreads are stable, compression has stopped, and verdant lending provides higher spread, so expect spreads to stay where they are.