Axos Financial (AX) Q2 2026: Loan Originations Jump 35% as Diversified Engines Drive Double-Digit Growth
Axos Financial’s second quarter showcased a surge in loan originations and robust deposit growth, underpinned by its diversified lending and funding model. The integration of Verdant, expansion of fee income, and ongoing technology investments are reshaping Axos’ profitability levers. Management signals a disciplined approach to growth, with a focus on balanced expansion, credit quality, and operational leverage.
Summary
- Loan Origination Acceleration: Commercial specialty and equipment finance drove a 35% sequential rise in originations.
- Deposit Mix Strengthens: Non-interest-bearing and specialty deposits expanded, supporting funding needs for outsized loan growth.
- AI and Integration Upside: Early tech investments and Verdant synergies set the stage for future operating leverage.
Performance Analysis
Axos delivered a standout quarter, with total loan originations (excluding single-family warehouse lending) reaching $5.6 billion, up 35% sequentially. Growth was broad-based, led by commercial specialty real estate, equipment leasing, and asset-based lending, while single-family mortgage balances stabilized after years of attrition. Net loan growth of $1.6 billion was funded by a 44% sequential increase in deposit balances, reflecting a deliberate push in both consumer and commercial channels.
Net interest income climbed 14% quarter-over-quarter, helped by a one-time FDIC loan prepayment but also underpinned by core lending strength. Net interest margin (NIM) expanded 19 basis points to 4.94%, though management cautioned that normalized NIM, excluding transitory items, is roughly flat and likely to drift down 5 to 6 basis points next quarter as FDIC accretion fades. Non-interest income also jumped, up 65% from the prior quarter, driven by higher banking fees, broker-dealer income, and the first full quarter of Verdant contributions.
- Commercial Lending Outperformance: Specialty verticals and new business lines like floor plan and middle market lending are fueling above-peer growth rates.
- Deposit Channel Diversification: Demand, money market, and savings accounts now make up 96% of total deposits, mitigating funding risk.
- Credit Quality Maintained: Non-performing assets and net charge-offs both improved, with no material losses anticipated in core portfolios.
Axos is successfully offsetting legacy accretion income declines with organic lending and fee income expansion, while keeping expense growth in check relative to revenue gains.
Executive Commentary
"We generated $1.6 billion of net loan growth link quarter with broad-based growth across several asset-based lending areas, commercial specialty, and equity finance verticals... We continue to maintain our best-in-class net interest margin with or without the benefit of the accretion from loans purchased from the FDIC."
Greg Gerbrandt, President and Chief Executive Officer
"Non-interest expenses were approximately $184.6 million for the three months ended December 31st, 2025... Excluding the Verdant-related expenses and the one-time accrual, non-interest expenses were roughly flat quarter over quarter. We are committed to keeping our salaries and benefits and professional services expense growth at 30% of our revenue growth or lower on an annual basis."
Derek Walsh, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Lending Engine Diversification
Axos’ lending model spans commercial real estate, specialty finance, equipment leasing, and emerging verticals like floor plan and middle market, enabling it to pivot between segments as market conditions shift. The commercial specialty and asset-based lending arms are now primary growth engines, while single-family mortgages have stabilized, reducing drag from legacy runoff.
2. Funding Resilience and Deposit Mix
Deposit growth is balanced across consumer, small business, commercial, and institutional channels, with non-interest-bearing and specialty deposits providing a stable funding base. The company’s focus on treasury management, custody, and clearing verticals is deepening relationships and lowering funding costs.
3. Verdant Acquisition Integration
Verdant, vendor-based equipment leasing business, is delivering accretive growth and fee income, with management emphasizing cross-sell potential into floor plan lending and specialty deposits. The integration is ahead of plan, with Verdant expected to reach the high end of its EPS accretion targets for fiscal 2026 and 2027.
4. Technology and AI-Driven Operating Leverage
AI deployment is accelerating across underwriting, compliance, and software development, enabling faster project execution and reducing reliance on staff growth. Management sees this as a structural advantage, allowing Axos to innovate and scale without proportionate cost increases.
5. Disciplined Capital and Credit Management
Credit quality remains a point of emphasis, with non-performing assets declining and reserves at over 215% of non-accrual loans. The company is deliberately pacing loan growth to match capital and liquidity constraints, prioritizing risk-adjusted returns over volume.
Key Considerations
This quarter highlighted Axos’ ability to deliver above-peer growth while maintaining balance across funding, credit, and expense levers. Strategic priorities are shifting toward deepening existing verticals and extracting synergies from recent investments.
Key Considerations:
- Organic Growth Outpaces Market: Robust pipelines and diversified lending channels are driving sustainable double-digit loan growth.
- Fee Income as a Counterweight: Non-interest income, particularly from Verdant and securities, is offsetting pressure on net interest margin.
- Expense Discipline Signals Leverage: Management’s commitment to keeping core expense growth under 30% of revenue growth preserves operating leverage.
- Credit and Capital Prudence: Underwriting standards remain tight, and capital allocation is aligned with measured growth, not just volume.
Risks
Axos faces potential margin compression as FDIC-purchased loan accretion fades and interest rates normalize, with management guiding for a modest NIM decline ahead. Rapid loan growth in commercial and specialty verticals brings heightened credit risk if economic conditions deteriorate. Integration execution and expense control around recent acquisitions, such as Verdant, remain critical for maintaining profitability momentum.
Forward Outlook
For Q3 2026, Axos guided to:
- Loan growth of $600 to $800 million, with balanced contributions across commercial, specialty, and equipment finance.
- Net interest margin expected to decline by 5 to 6 basis points as FDIC accretion normalizes.
For full-year 2026, management reiterated low to mid-teens loan growth, including Verdant, and expects fee income and operating leverage to remain strong:
- EPS accretion from Verdant tracking toward the high end of 2% to 3% for 2026 and 5% to 6% for 2027.
Management highlighted that robust pipelines, cross-sell opportunities, and technology investments will support continued growth, while expense and credit discipline remain top priorities.
- Loan pipelines remain healthy at $2.2 billion, spanning residential, commercial, and specialty verticals.
- Deposit mix and funding costs are being actively managed to support growth without sacrificing margin.
Takeaways
Axos is leveraging its diversified platform and recent acquisitions to deliver outsize growth while controlling risk and expenses.
- Growth Engines Deliver: Commercial specialty, equipment finance, and fee businesses are offsetting legacy runoff and margin headwinds, driving sustainable expansion.
- Verdant Integration Upside: Cross-sell and operational synergies are already materializing, with Verdant’s growth and profitability accretive to Axos’ earnings.
- Margin and Credit Watch: Investors should monitor NIM compression, credit quality in new lending verticals, and execution on AI-driven cost leverage in coming quarters.
Conclusion
Axos Financial’s Q2 2026 results underscore the power of a diversified, tech-enabled banking model to deliver high growth and resilience. As management pivots toward extracting more value from recent investments and technology, the focus remains on balanced, sustainable expansion and disciplined risk management.
Industry Read-Through
Axos’ results highlight the competitive edge of digital-first, diversified lenders in a shifting rate and credit environment. The ability to flex between lending verticals, rapidly integrate acquisitions, and deploy AI for operating leverage is increasingly a differentiator among regional banks. Traditional banks reliant on single-product lines or legacy tech stacks may face greater margin and funding pressure, while those embracing tech-driven diversification and specialty lending can better weather economic and rate cycles. The Verdant integration also signals a broader trend of banks seeking fee-based businesses to offset NIM volatility and regulatory capital constraints.