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Axos Financial NYSE: AX management emphasized “an outstanding quarter across a variety of growth, credit, and profitability metrics” as the company reported results for the quarter ended December 31, 2025 (fiscal second quarter 2026). Executives pointed to strong linked-quarter loan growth, higher net interest income and margin, improving credit indicators, and additional contributions from the recently acquired Verdant Commercial Capital platform.
Loan growth and profitability highlights
President and CEO Greg Garrabrants said Axos generated $1.6 billion of net loan growth linked quarter, describing it as broad-based across asset-based lending, commercial specialty, and equity finance verticals. The company reported net income of about $128.4 million for the quarter, up from $104.7 million in the prior-year period, and diluted EPS of $2.22 compared with $1.80 a year earlier. Axos also cited returns of over 17% return on average common equity and 1.8% return on assets in the three months ended December 31, 2025.
Net interest income totaled $331.6 million, rising about $41 million, or 14%, from the prior quarter, helped by growth in single-family mortgage warehouse, commercial specialty real estate, equipment finance, and fund finance. Management noted that one FDIC purchased loan prepaid during the quarter, creating about $17 million of interest income benefit. Excluding that benefit, net interest income increased about $23 million, or 8%, linked quarter.
Net interest margin factors and outlook
Axos reported a net interest margin (NIM) of 4.94%, up 19 basis points from 4.75% in the September quarter. Garrabrants said that excluding the impact of the early payoff of an FDIC purchased loan and the impact of Verdant’s balance-sheet securitization financing, Axos’ margin was 4.72%, roughly flat with the prior quarter.
Management said the “net impact” from the FDIC loan payoff and Verdant secured financing boosted reported NIM by about 22 basis points in the December quarter. Looking ahead, Garrabrants said the company expects NIM accretion from FDIC purchased loans to be 10 to 15 basis points going forward, reflecting payoffs and maturities in that portfolio.
On the Q&A, management confirmed expectations for a 5 to 6 basis point decline in the “adjusted margin” in the March quarter relative to December, citing a roughly 90% down-beta on deposit pricing related to the last 50 basis points of rate cuts. Management also noted that the March quarter has two fewer days, which they said implies about a 2% net interest income reduction versus other quarters.
Regarding the remaining life of the FDIC purchased loan portfolio (referred to as the Signature FDIC loan purchase on the call), management said the average remaining life is about three to four more years. They also discussed scheduled accretion expectations: excluding the quarter’s one-time prepayment-related gain, Axos received about $9 million of Signature FDIC accretion in the December quarter, while going forward they expect regular accretion of about $6.5 million per quarter due to prepayments and maturities.
Fee income and Verdant’s contribution
Non-interest income increased about $21 million linked quarter, which management attributed to higher banking service fees, broker-dealer fee income, and prepayment penalty fees. The quarter also represented the first period with non-interest income and expense contributions from Verdant. Garrabrants said Verdant contributed about $18.9 million of non-interest income in the quarter.
EVP and CFO Derrick Walsh reported consolidated non-interest income of $53.4 million, up 65% from $32.3 million in the prior quarter. He said the increase included Verdant’s contributions and growth in broker-dealer and advisory fee income. Walsh added that, in the quarter, Axos recorded $24.3 million of interest income from Verdant loans and leases and $14.1 million of non-interest income from operating leases.
In response to questions, management said the December quarter provides a reasonable “jumping-off point” for fee income with Verdant in the fold, while noting that the mix between interest income and operating-lease-related non-interest income can fluctuate depending on transaction structures. Axos also cited a $1.5 million paper statement fee in the quarter, which management described as impactful but not overly significant.
Deposits, credit trends, and pipeline
Axos ended the quarter with $23.2 billion of deposits, up 44.3% linked quarter and 16.5% year-over-year. Management said demand, money market, and savings accounts represented 96% of total deposits, and increased 17% year-over-year. The company outlined a diverse funding mix across business verticals and noted average non-interest-bearing deposits of about $3.5 billion, up from $3.0 billion in the prior quarter.
On credit, management highlighted improvements in non-performing metrics. Total non-accrual loans to total loans declined to 61 basis points at December 31, 2025 from 74 basis points at September 30, 2025, while non-performing assets improved to 56 basis points of total assets from 64 basis points. Net charge-offs to total assets were 4 basis points, down from the prior quarter, and Axos reported an allowance for credit loss equal to 215.8% of non-accrual loans at quarter end. Walsh said provisions for credit losses were $25 million, up from $17.3 million in the prior quarter, primarily due to robust commercial lending growth and an additional $2.8 million provision for unfunded commitments tied mainly to commercial real estate specialty and C&I lending.
Axos reiterated confidence in loan growth of low to mid-teens on an annual basis, supported by demand in commercial specialty real estate, fund finance, and lender finance, as well as newer verticals such as floorplan and middle-market lending. Management said it entered January with about $800 million higher starting loan balances than the prior quarter’s average and expects loan growth of about $600 million to $800 million in the current quarter.
Walsh said the loan pipeline was about $2.2 billion as of January 23, 2026, consisting of:
- $598 million of single-family residential jumbo mortgage
- $75 million of single-family gain-on-sale mortgage
- $200 million of multifamily and small balance commercial
- $82 million of auto and consumer
- $1.2 billion across commercial
Management also discussed strategic initiatives, including integrating Verdant, expanding cross-sell opportunities (including deposits and floorplan lending), and deploying artificial intelligence tools to improve productivity in software development and commercial credit workflows. Garrabrants said the company continues to evaluate M&A opportunities and team liftouts, while noting that near-term focus may be on developing teams brought in over the past year.
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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