Axos Financial delivered another quarter of double-digit earnings growth, posting $2.50 diluted EPS — up 18.7% year over year — while announcing two transformative deposit acquisitions totaling $5.5 billion that will significantly reshape its balance sheet through 2027. Management confirmed confidence in low-to-mid teens loan growth for the year ahead.
Section 01
The big story: $5.5 billion in deposits coming in
Axos announced two separate deposit acquisitions that together will add $5.5 billion in retail deposits to its balance sheet. These are not bank takeovers — Axos is buying only the deposit books, receiving cash from the sellers and taking on the obligation to repay those depositors.
When Axos buys a deposit portfolio, the seller hands over the cash those customers deposited, minus a negotiated premium Axos pays. Axos then becomes responsible for those deposits going forward. Customers are notified but cannot block the transfer — they can only withdraw their money if unhappy with the new bank. The premium Axos pays is the cost of instantly acquiring a stable funding base without running expensive marketing campaigns to attract individual savers one by one.
Deal 1 — Jenius Bank (SMBC): $2.3 billion. Online savings deposits from SMBC’s digital banking arm. Regulatory approval already received, expected to close June 2026. SMBC is simply exiting the U.S. retail banking market — Jenius Bank is being wound down strategically, not rescued. Axos gains roughly 60,000 digital banking clients it can cross-sell additional products to.
Deal 2 — Capital One IRA/CD portfolio: $3.2 billion. Individual retirement accounts (traditional and Roth IRAs) covering over 101,000 accounts. Announced April 22, 2026, awaiting OCC regulatory approval. Capital One sold this portfolio to free up management focus and capital for its core credit card and commercial banking business. For Axos, these are long-duration, stable retirement savings — ideal low-cost funding.
* Projected quarters — acquisitions announced but not yet closed. Deal sizes confirmed in SEC filings.
Axos deliberately shed some higher-cost savings deposits in Q3 and replaced them temporarily with Federal Home Loan Bank (FHLB) borrowings — bridging its funding until the Jenius deposits arrive in June. FHLB is a government-sponsored institution that lends to banks at favorable rates secured by loan collateral, acting as a wholesale funder banks tap for short-term liquidity management. Once Jenius deposits land, Axos will repay those FHLB borrowings and be left with cheaper, longer-duration retail funding.
Section 02
Core financial results
Net interest income — the spread between what Axos earns on loans and what it pays on deposits — rose 11.2% year over year, driven by $700 million in net loan growth during the quarter. This is the core engine of any bank’s profitability, and Axos continues to expand it at a double-digit pace.
Net interest margin (NIM) declined to 4.57% from 4.94% in the prior quarter, in line with management’s guidance. The main drivers were two Federal Reserve rate cuts of 25 basis points each in late 2025, which reduced yields on variable-rate loans, and fewer prepayments on FDIC-purchased loans. These are discounted loan portfolios Axos acquired from the FDIC during past bank failures — they generate extra income when borrowers repay early, but that windfall has now largely played out.
Noninterest income — revenue from fees and services rather than lending — surged to $86 million from $33.4 million a year ago. However, $22 million of that came from a one-time legal settlement. Stripping it out, underlying fee income still grew approximately $10 million quarter-over-quarter, driven by mortgage servicing rights valuation, advisory fees, and rental income from Axos’s new future headquarters building purchased in January 2026.
The Verdant Equipment Leasing acquisition, completed in 2025, contributed $200 million of new loans and $23.7 million in noninterest income in the March quarter alone — up from $18.9 million in December. Equipment finance is becoming a meaningful earnings driver for Axos.
On expenses, artificial intelligence is beginning to show real results. Salaries and benefits declined slightly quarter-over-quarter despite the growing business, and AI tools now assist in writing 90% of committed code. Over 500 employees use enterprise AI tools — a 37% increase in technical users since January 2026.
Section 03
Credit quality: one problem loan, otherwise solid
Provision for credit losses rose to $41 million from $25 million last quarter, almost entirely due to a $20 million specific reserve on a single C&I loan. C&I stands for Commercial & Industrial — loans extended to businesses for operating purposes such as equipment, working capital, or expansion, secured by company assets rather than real estate. A specific reserve means the bank has identified a concrete impairment on one loan, not a statistical deterioration across the portfolio.
A syndicated loan — one shared by multiple banks — became delinquent this quarter, adding $33 million to nonperforming assets. Axos was not the original lead bank on this credit and noted that earlier decisions by the prior agent were insufficiently tough. Axos has now taken over as lead agent and is actively working to resolve it. A $14 million principal charge-off was already taken on a previously reserved C&I loan, with $17 million of remaining balance and a $10 million specific reserve still in place.
Despite this, overall credit quality remains healthy. Total nonperforming assets declined to 62 basis points of total assets — down from 71 basis points a year ago. The allowance for credit losses covers 192.2% of nonaccrual loans, indicating the bank is well-reserved relative to its stressed exposures. Excluding the one charge-off, net charge-offs were just 8 basis points annualized — a very low level for a growth-oriented commercial bank.
Section 04
Management guidance
“Taking all these factors into consideration, we are confident that we will generate loan growth in the low to mid teens on an annual basis this year.”
— Gregory Garrabrants, President and CEO, Axos Financial
Low-to-mid teens means roughly 12–14% annualized loan growth. With a current loan pipeline of $2.6 billion — spanning jumbo SFR mortgages ($611M), commercial lending ($1.7B), multifamily ($103M), and auto/consumer ($83M) — management sees broad-based momentum across multiple verticals.
The deposit acquisitions are the strategic fuel behind this guidance: more stable, low-cost funding means Axos can lend more aggressively without raising deposit rates or increasing marketing budgets. Net interest margin is expected to remain roughly flat organically, with a modest 5 basis point amortization drag from the acquisition premiums paid to Jenius and Capital One.
On future M&A, management described an active pipeline spanning fintechs, lending teams, and banks, emphasizing a patient and disciplined approach — building relationships over time rather than rushing transactions.
Section 05
Quarterly revenue & net income trends
Revenue (net interest income + noninterest income) has grown consistently, with acceleration in Q2 and Q3 FY2026 driven by the Verdant acquisition and one-time legal settlement. Net income tracks closely, reflecting strong operating leverage.
* YoY shown for quarters where prior-year data available from SEC filings. All figures in USD millions.
Section 06
Loan growth vs revenue & net income
The chart below shows the relationship between total loan book size (left axis) and quarterly revenue and net income (right axis). Loan growth is the primary engine of Axos’s revenue — as the loan book expands, net interest income follows. The acceleration from Q1 2026 onward reflects the Verdant acquisition closing in Q1 FY2026.
Source: SEC 8-K press releases and earnings supplements. Loans = net loans held for investment.