Axos Financial 2026 Q4 Earnings Call

Thanks, Alicia. Good afternoon, everyone. Welcome to our fourth quarter 2026 earnings conference call. Joining us today are the company's President and Chief Executive Officer, Greg Garrabrants, Executive Vice President and Chief Financial Officer, Derrick Walsh. Greg and Derrick will review and comment on the financial and operational results for the quarter and fiscal year ended June 30th, 2026, we will be available to answer questions after the prepared remarks. Before I begin, I would like to remind listeners that prepared remarks made on this call may contain forward-looking statements that are subject to risks and uncertainties that management may make additional forward-looking statements in response to your questions. Please refer to the safe harbor statement found in today's earnings press release in our investor presentation.

This call is being webcast, there'll be an audio replay available in the IR section of the company's website located at axosfinancial.com for 30 days. Details for this call were provided on the conference call announcement in today's earnings press release. I'd like to turn it over to Greg for opening remarks.

Thank you, Johnny. Good afternoon, everyone. Thank you for joining us. I'd like to welcome everyone to Axos Financial's fiscal 2026 earnings conference call for the quarter ended June 30, 2026. I thank you for your interest in Axos Financial. We closed our fiscal 2026 with positive momentum, with double-digit year-over-year growth in net interest income, non-interest income, ending loan and deposits, EPS, and book value per share. We generated approximately $638 million of net loan growth linked quarter, resulting in a 15% annualized growth in net income. Excluding single-family mortgage warehouse, ending net loan balances increased by $750 million from March 31st, 2026 to June 30th, 2026. Other highlights in the quarter include non-interest income was $61.9 million for the quarter ended June 30, 2026, up from $41.3 million in the corresponding quarter a year ago.

For the 12 months ended June 30, 2026, non-interest income was $233.6 million, compared to $131.1 million in fiscal year 2025. The primary contributor to the year-over-year growth in non-interest income for the three and 12-month period were Verdant prepayment fees and the additional rental income from the commercial office building we purchased in January 2026 to be used as our future headquarters. Net interest margin was 4.54% for the quarter ended June 30, 2026, roughly flat compared to 4.57% in the prior quarter. Excluding the impact from holding higher average cash balances and the addition of deposits acquired from Jenius Bank, our net interest margin was up slightly quarter-over-quarter. Non-interest expenses were at $205.9 million for the three months ended June 30, 2026, up by $20 million linked quarter.

Excluding the $21 million accrual related to a legal matter in our clearing business, non-interest expenses were down $1 million linked quarter due to lower advertising, promotion, professional services, and other G&A expenses. We continue to maintain a low operating efficiency ratio despite ongoing investments in product technology and people. Our bank efficiency ratio was 42.2% for the 12 months ended June 30, 2026, compared to 40.8% in the fiscal year 2025. Non-performing assets were $159 million at June 30, 2026, down from $180 million at March 31, 2026 and $175 million at June 30, 2025. We remain well reserved relative to our low current and historic level of net charge-offs, with an allowance for credit losses to total loans of 1.34% at June 30, 2026.

Net income was approximately $124.9 million in the quarter ended June 30, 2026, up 12.9% from the $110.7 million in the prior year's fourth quarter. Diluted EPS was $2.16 per share for the quarter ended June 30, 2026, compared to $1.92 per share in the fourth quarter of fiscal 2025, representing a 12.5% year-over-year increase. Excluding the $21 million legal accrual, net income was $141.8 million, and diluted earnings per share was $2.46 for the three months ended June 30, 2026, up 28% from the prior year's comparable quarter. We repurchased $22 million of common stock during the three months ended June 30, 2026 at an average price of $87.95 per share. We have approximately $126 million remaining in our current share repurchase authorization. Total originations for investment excluding single-family warehouse lending increased 22% on a linked quarter basis, resulting in ending net loan growth of approximately $750 million.

Loan growth was strong in capital call, real estate lender finance, floor plan lending, and equipment finance. Jumbo single-family, multifamily, and small balance commercial loan balances were roughly flat linked quarter. Average loan yields for the three months ended June 30, 2026 were 7.4%, stable compared to the prior quarter. Average loan yields for non-purchase loans were 7.2%, and average yields for purchase loans was 13%, which includes the accretion of our purchase price discount. The FDIC purchase loans continue to perform, and all loans in that portfolio remain current. Quarter were 6.9% in our single family mortgage business, 6.8% in multifamily, 6.6% in C&I lending, and 7.8% in our auto portfolio. Ending deposit balances of $24.6 billion were up 17.9% year-over-year. Demand, money market, and savings accounts represent 98% of total deposits as of June 30, 2026, increasing by 22% year-over-year.

We have a diverse mix of funding across a variety of business verticals, with consumer and small business representing 57% of total deposits, commercial cash, treasury management, and institutional representing 20%, commercial specialty representing 14%, Axos Fiduciary Services representing five, and Axos securities also representing five. We closed the Jenius deposit acquisition in early May 2026, adding approximately $2.3 billion of deposit balances in over 56,000 consumer savings accounts. We have been successful in cross-selling checking accounts to Jenius customers so far, adding over 3,400 new Axos consumer checking accounts in the few months since we onboarded these Jenius customers to UDB. Ending non-interest-bearing deposits increased by $439 million linked quarter and $788 million year-over-year to over $3.8 billion as of June 30, 2026.

The linked quarter and year-over-year increase in non-interest-bearing deposits is a result of growth in Axos Clearing and Axos Fiduciary Services cash sweep deposits, increased cross-sell from certain commercial lending businesses, and growth in our small business deposits. Client cash sorting deposits ended the quarter around $1.2 billion, up from $1.1 billion in March 31st, 2026. In addition to our securities deposits on balance sheet, we had approximately $475 million of deposits off balance sheet at partner banks. We remain focused on adding non-interest-bearing deposits from small business, custody clearing, fiduciary services, and commercial and treasury cash management verticals. Our fund finance business had another strong quarter, contributing over $600 million of net new loan growth in the June quarter. We continue to identify opportunities to deepen our relationships with existing fund finance partners, as well as add new fund relationships.

Our diverse product and service offerings in commercial cash and treasury management have enabled us to capture low cost deposits through the fund finance vertical. The growth in our vendor ecosystem continues to gain momentum. The Verdant equipment finance and non-marine floor plan lending teams actively collaborate on a variety of retail and wholesale lending opportunities. Both teams are leveraging their expertise and relationships across their vendor and dealer networks to gain share of wallet and to provide a more seamless and differentiated set of lending solutions to our vendor partners. The floor plan lending business had its strongest quarter to date, growing outstanding loans by over $100 million in the three months ended June 30, 2026. Demand in our commercial specialty real estate, fund finance, real estate lender finance, and asset-based lending businesses remain strong.

Pipelines are up across several lending categories, making us confident that we will generate loan growth in the low to mid-teens on an annual basis this year. The credit quality of our loan book remains strong and our historical and current net charge-offs remain low. Net charge-offs were 25 basis points in the quarter ended June 30, 2026, compared to 31 basis points in the prior quarter. We charged off the remaining $10 million of our principal balance in the syndicated C&I cash loan that was put on non-accrual over a year ago. Excluding the credit charge-off related to that loan, total net charge-offs were $5.9 million in the three months ended June 30, 2026, or nine basis points of net annualized charge-offs to average loans. Total non-performing assets were $159 million at June 30, 2026, down approximately $23 million from $180 million at March 31st, 2026.

Non-performing assets declined by approximately $21 million in C&I lending and held roughly flat across most other lending categories. Non-accruals and classified assets remain low across the majority of our real estate backed and structured credits. Total non-performing assets and total assets was 53 basis points, down nine basis points from March 31, 2026, and down 18 basis points from June 30, 2025. We remain well reserved for our low level of credit losses with our allowance for credit loss to non-accrual loans equal to 221% at June 30, 2026. We had another quarter of double-digit year-over-year growth in non-interest income. Total non-interest income for the three months ended June 30, 2026, was $61.9 million, up 50% year-over-year. Banking and service fees in Q4 2026 were $36.8 million, compared to $9.5 million in the year ago quarter.

Verdant was the primary contributor to the year-over-year increase in banking and service fees. Prepayment penalty fees were $4.2 million, compared to $0.2 million in Q4 2025. In Axos Clearing, advisory and broker fees were up year-over-year due to higher asset and transaction-based income. Total assets under custody or administration increased by $8.4 billion year-over-year to $47.8 billion. Net new assets were approximately $85 million in the quarter ended June 30, 2026, bringing the net new asset total to $2.2 billion for fiscal year 2026. Cash sorting deposits on and off balance sheet increased by over $100 million linked quarter to $1.67 billion. Ending margin balances were up 36% from the prior fiscal year.