Axos Financial Posts Robust Q2 Growth, Fueled by Loan Expansion and Verdant Acquisition

Axos Financial Delivers Strong Quarter on Loan Growth, Margin Expansion

SAN DIEGO – Axos Financial, Inc. (NYSE: AX) showcased a quarter of significant financial momentum, reporting substantial gains in profitability, loan volume, and credit quality for its fiscal second quarter ended December 31, 2025. The digital banking firm's performance underscores its successful navigation of a complex interest rate environment and the strategic integration of its recent acquisition.

President and CEO Greg Garrabrants hailed the period as "outstanding," pointing to a $1.6 billion increase in net loans from the prior quarter. This growth was widespread across the company's key verticals, including asset-based lending and commercial specialty finance. The bottom line reflected this strength, with net income rising to $128.4 million, or $2.22 per diluted share, up from $104.7 million and $1.80 per share a year ago.

A key driver was net interest income, which climbed 14% sequentially to $331.6 million. Management noted that approximately $17 million of this benefit came from an early payoff within its FDIC-purchased loan portfolio. Excluding this one-time item, underlying growth remained solid at 8%. The reported net interest margin (NIM) expanded to 4.94%, though the core margin, adjusted for special items, held steady around 4.72%.

The quarter also marked the first full contribution from Verdant Commercial Capital, acquired to bolster Axos's equipment finance capabilities. Verdant added roughly $18.9 million in non-interest income, helping push total fee income to $53.4 million, a 65% linked-quarter increase.

Credit Strength and Forward Guidance

Credit metrics showed marked improvement, a positive signal for investors wary of economic headwinds. Non-accrual loans fell to 0.61% of total loans from 0.74% the prior quarter. The company's allowance for credit losses stood at a robust 215.8% of non-accrual loans.

Looking ahead, executives provided nuanced guidance. While the core adjusted margin is expected to dip 5-6 basis points in the March quarter due to deposit pricing dynamics, the company remains bullish on loan growth. Management entered January with loan balances $800 million above the prior quarter's average and projects further growth of $600 to $800 million in the current quarter. The annual loan growth target remains in the low-to-mid teens percentage range.

"Our diversified model and technology-driven approach are yielding tangible results," said EVP and CFO Derrick Walsh. "The integration of Verdant is on track, and our pipeline of over $2.2 billion provides clear visibility into future growth."

Analyst and Investor Reactions

Michael Thorne, Portfolio Manager at Clearwater Advisors: "Axos continues to execute impressively. The margin resilience, even on an adjusted basis, coupled with that level of loan growth, is exactly what you want to see from a growth-oriented bank in this climate. The Verdant integration appears accretive and smooth."

Sarah Chen, Fintech Analyst at Broadgate Research: "The numbers are strong, but I'm more intrigued by the strategic commentary on AI deployment in credit workflows and cross-selling. This isn't just a bank reporting earnings; it's a tech-forward financial platform laying groundwork for scalable efficiency."

David R. Miller, Independent Banking Analyst (The Miller Report): "Let's not get carried away. A significant portion of this 'beat' was a one-time loan payoff. Their guidance for next quarter's margin is down, and a 16.5% year-over-year deposit growth rate, while good, is being spun as extraordinary. The credit loss provision is up sharply. The market is rewarding short-term pops, but the underlying cyclical pressures on regional and specialty banks haven't vanished."

Rebecca Foster, Senior Associate at Hartford Capital: "The improvement in non-performing assets is the most critical takeaway for me. In an environment where everyone is waiting for the other shoe to drop in commercial real estate, Axos is showing improving credit trends. That, more than anything, justifies a premium valuation."

Axos Financial, headquartered in San Diego, is a diversified online banking and financial services holding company operating through Axos Bank. The firm serves retail and commercial clients nationwide with a technology-driven platform.