8-K: Axos Financial Reports Strong Q2 FY26 Earnings

Axos Financial, Inc. announced robust second fiscal quarter 2026 results, with net income and diluted EPS significantly increasing year-over-year, driven by strong loan growth and non-interest income.

Summary

• Net income for the quarter ended December 31, 2025, was $128.4 million, representing a 22.6% increase from $104.7 million in the prior year.
• Diluted earnings per share (EPS) for the quarter was $2.22, up 23.3% from $1.80 in the prior year.
• Adjusted earnings (non-GAAP) increased 23.0% to $130.2 million, and Adjusted EPS (non-GAAP) increased 23.6% to $2.25.
• Net interest income grew by 18.4% year-over-year to $331.7 million.
• Non-interest income surged 92.0% to $53.4 million, primarily due to the acquisition of Verdant Commercial Capital, LLC.
• Ending net loan balances reached $24.3 billion at December 31, 2025, reflecting a $1.6 billion increase linked quarter.
• Total deposits increased by over $2.4 billion, or 23.1% annualized, from June 30, 2025, to $23.2 billion at December 31, 2025.
• Book value per share increased 17.0% to $51.70 at December 31, 2025, from $44.17 at December 31, 2024.

Sentiment

Score: 8

Explanation: StockSavvy.ai views this as a very positive report, driven by strong growth in net income, EPS, and key operational metrics like loan balances and deposits, alongside improved asset quality. The Verdant acquisition appears to be contributing significantly to non-interest income, diversifying revenue streams.

Positives

• Net income increased 22.6% year-over-year to $128.4 million.
• Diluted EPS increased 23.3% year-over-year to $2.22.
• Adjusted earnings (non-GAAP) increased 23.0% to $130.2 million.
• Adjusted EPS (non-GAAP) increased 23.6% to $2.25.
• Net interest income grew 18.4% year-over-year to $331.7 million.
• Non-interest income surged 92.0% year-over-year to $53.4 million, driven by the Verdant acquisition.
• Ending net loan balances increased by $1.6 billion linked quarter to $24.3 billion, with robust growth in commercial real estate specialty, capital calls, single-family warehouse, and equipment leasing.
• Net annualized charge-offs to average loans decreased to 4 basis points for the three months ended December 31, 2025, down from 10 basis points in the prior year.
• Non-performing assets to total assets improved to 0.56% as of December 31, 2025, down from 0.71% as of June 30, 2025.
• Net interest margin improved to 4.94% for the three months ended December 31, 2025, compared to 4.83% in the prior year.
• Total deposits increased by over $2.4 billion, or 23.1% annualized, from June 30, 2025, reaching $23.2 billion.
• Added $937.7 million of net new assets under custody during the quarter; total assets under custody and/or administration was $44.4 billion at December 31, 2025.
• Book value per share increased 17.0% to $51.70 at December 31, 2025.
• Allowance for credit losses loans to non-accrual loans increased to 215.81% from 107.58% year-over-year, indicating stronger coverage.

Negatives

• Provision for credit losses increased to $25.0 million for the three months ended December 31, 2025, compared to $12.2 million in the prior year, primarily due to loan growth and macroeconomic variables.
• Non-interest expense increased $39.3 million to $184.6 million for the three months ended December 31, 2025, primarily due to higher depreciation and amortization related to the Verdant acquisition, general and administrative expense, and salaries.
• Axos Financial, Inc.'s Tier 1 leverage, Common equity tier 1 capital, Tier 1 capital, and Total capital ratios all decreased compared to the prior quarter and prior year-end.
• Axos Bank's capital ratios (Tier 1 leverage, Common equity tier 1 capital, Tier 1 capital, Total capital) also decreased compared to the prior quarter and prior year-end.

Risks

• Ability to successfully integrate acquisitions and realize the anticipated benefits of transactions.
• Changes in the interest rate environment.
• Monetary policy changes.
• Inflation.
• Tariffs.
• Government regulation.
• General economic conditions.
• Changes in the competitive marketplace.
• Conditions in the real estate markets in which the company operates.
• Risks associated with credit quality.
• Ability to attract and retain deposits and access other sources of liquidity.
• The outcome and effects of litigation.
• Other factors beyond the company's control.

Future Outlook

The company anticipates continued profitable growth and diversification of its lending and deposit franchises, with expectations for the timing and financial performance of other offerings, initiatives, and acquisitions. However, these forward-looking statements are subject to various risks and uncertainties, including changes in the interest rate environment, general economic conditions, and regulatory factors.

Management Comments

• "Strong net interest income growth and a solid net interest margin resulted in a 23.3% year-over-year increase in our diluted earnings per share this quarter." Greg Garrabrants, President and Chief Executive Officer of Axos.
• "Net interest income increased 14% linked quarter due to strong organic loan growth and positive contribution from a prepayment in our FDIC-purchased loans." Greg Garrabrants, President and Chief Executive Officer of Axos.
• "Net ending loan balances increased by $1.6 billion linked quarter due to robust growth across several lending businesses, including commercial real estate specialty, capital calls, single-family warehouse and equipment leasing." Greg Garrabrants, President and Chief Executive Officer of Axos.
• "Non-interest income was $53.4 million for the quarter ended December 31, 2025, including $18.9 million related to operating lease rental and other income from Verdant, compared to $32.3 million in the prior quarter." Derrick Walsh, Chief Financial Officer of Axos.
• "Excluding these two Verdant items [non-cash depreciation and amortization expenses and other expenses related to Verdant], non-interest expenses were relatively flat linked quarter." Derrick Walsh, Chief Financial Officer of Axos.

Industry Context

StockSavvy.ai notes that Axos Financial's strong loan growth, particularly in commercial real estate specialty, capital calls, single-family warehouse, and equipment leasing, indicates a robust demand environment in these niche lending sectors. The significant increase in non-interest income, largely attributed to the Verdant acquisition, highlights a successful strategy of diversifying revenue streams, a common trend among financial institutions seeking to reduce reliance on traditional interest-based income in potentially volatile rate environments. The improvement in asset quality ratios, such as lower net annualized charge-offs and non-performing assets, suggests effective risk management amidst broader economic uncertainties.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results for direct benchmarking.
• Axos's diluted EPS growth of 23.3% and net income growth of 22.6% year-over-year are strong indicators of performance, potentially outpacing many regional banks and diversified financial services firms that may be facing tighter margins or slower loan growth.
• The net interest margin of 4.94% is generally considered healthy for a bank, especially compared to larger, more traditional banks that often operate with lower NIMs due to different funding structures and asset mixes.
• The decrease in net annualized charge-offs to 4 basis points and non-performing assets to 0.56% suggests superior asset quality management compared to industry averages, which can fluctuate based on economic cycles and specific loan portfolios.
• The decline in capital ratios (Tier 1 leverage, CET1, Total Capital) for both Axos Financial and Axos Bank, while still above regulatory minimums, warrants attention as it contrasts with some peers who might be maintaining or building capital buffers.

Stakeholder Impact

• Shareholders: Positive impact due to increased net income, EPS, book value per share, and strong loan growth.
• Customers: Continued growth in lending businesses and diversified banking products suggest ongoing service offerings.
• Employees: Increased non-interest expense due to salaries and related costs suggests continued investment in personnel, potentially positive for employees.
• Creditors: Improved asset quality ratios (lower charge-offs, non-performing assets) and strong capital position (though slightly decreased) generally indicate lower credit risk.

Next Steps

• A conference call and webcast will be held on Thursday, January 29, 2026, at 5:00 PM Eastern / 2:00 PM Pacific.
• A replay of the conference call will be available until February 28, 2026, on Axos's website and telephonically.
• Axos undertakes no obligation to publicly update or revise any forward-looking statements.

Key Dates

Recommendation

The company delivered exceptional Q2 FY26 results with significant year-over-year growth in net income, diluted EPS, and adjusted earnings. Key operational metrics like net interest income, non-interest income (boosted by the Verdant acquisition), and loan balances showed robust expansion. Asset quality improved with lower charge-offs and non-performing assets, and book value per share increased substantially. While capital ratios saw a slight decline, they remain healthy. These strong financial and operational performances, coupled with strategic acquisitions contributing to diversified revenue, suggest a compelling investment opportunity.

Keywords

Axos Financial, AX, earnings, financial results, Q2 FY26, net income, EPS, diluted EPS, adjusted earnings, net interest income, non-interest income, loan growth, deposits, assets under custody, book value, credit quality, non-performing assets, net interest margin, Verdant acquisition, banking, financial services, commercial real estate, capital calls, equipment leasing, SEC filing, 8-K