Oct 29, 2026 earnings call — Capital One deposit deal and loan growth update
Axos closed the Capital One deposit acquisition adding approximately $1.8 billion in IRA savings and CDs.
Revenue $0.4B (est $0.4B) · EPS $2.34 (est $2.26)
Key quotes
"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 in fiscal 2027."
"We closed the Capital One deposit acquisition in September, adding approximately $1.8 billion in IRA savings and CDs."
"The quality of our loan book remains strong despite two isolated charge-offs we took this quarter."
Analyst Q&A 7
NIM drivers and loan charge-off timing
Q (David Chiaverini · Jefferies): Asked how the Capital One deposits, excess liquidity, and asset sensitivity affect net interest margin. Also asked how long the charged-off C&I loans had been worked out and whether the charge-offs were sudden.
A: Management said the Capital One balances will add approximately $700 million of lower-earning assets and that will drag NIM in the December quarter. They expect some net interest income expansion beyond this quarter but the NIM ratio may be flatter near term. On the charge-offs, they said the large C&I charge-off and the other weak credits had been reserved for several quarters and were taken as charge-offs when performance warranted.
"For the excess cash and deposits from Capital One, so that will add approximately a $700 million average asset or excess cash, which is obviously a lower earning asset than our loan yields." — Derrick Walsh (CFO)
Lending demand, retention, Arc/tech lending
Q (David Feaster · Raymond James): Asked whether rising rates have changed loan demand or pipeline fallouts and which segments look best. Also asked about retention and cross-selling after recent deals and how Arc fits into venture or tech lending.
A: They said single-family mortgage demand is down generally, but securitization gaps have made their jumbo mortgage business more competitive and the pipeline is larger. They saw more payoffs than expected this quarter, syndicated almost $300 million of capital call production, and expect loan growth to improve next quarter. On the deals, Jenius checking cross-sell is going well, Cap One accounts are too early to judge, Arc brings deposits and acts as a broker and deposit taker, and Axos does essentially no direct venture lending on balance sheet.
"Arc effectively acts simply as a broker to -- as a broker and as a deposit taker" — Gregory Garrabrants (CEO)
New non-accruals and loss risk
Q (Gary Tenner · D.A. Davidson): Asked about inflows into C&I non-accruals after the quarter's charge-offs and whether one loan has greater loss potential than the other. Also asked about the prepayment penalty fee trend and the rate on Arc-related deposits.
A: They said two additional credits were placed on non-accrual this quarter: one is a C&I loan mostly backed by real estate with a recent appraisal at the loan balance so they expect little loss, and the other is a cash-flow operating loan with higher potential loss and a decent reserve. They said prepayment penalty income likely will fall this quarter and they expect loan growth to be better. For Arc deposits, there are several hundred million of zero-cost deposits and other savings-style deposits priced around 80% of Fed funds.
"We have the real estate value on a recent appraisal at the loan balance." — Gregory Garrabrants (CEO)
Where to grow loans and Bitcoin product plan
Q (Kyle Peterson · Needham & Company): Asked which loan areas they plan to push into over the next quarters. Also asked for details and timing on crypto/blockchain plans, and whether it covers deposits, lending, or advisory.
A: They said many segments show opportunity, including equipment leasing, floor plan, capital-call lending, and other commercial segments, though some smaller multifamily 5/1 ARM lending remains disrupted. For crypto, they plan to add Bitcoin purchase capability in the self-directed trading account, using a third-party custodian and APIs, target a March 2027-ish launch into beta, and then roll out a Bitcoin lending (margin) program shortly after.
"And then we will roll out a Bitcoin lending program that will be like the margin program that will follow shortly after that." — Gregory Garrabrants (CEO)
Charge-off structures and expense outlook
Q (Andrew Liesch · StoneX Financial): Asked whether the charged-off loans used A/B note structures with non-bank lenders and whether the charge-offs stemmed from an SNC exam. Also asked about higher advertising and the longer-term expense growth rate comment.
A: They said both charged-off loans were syndicated cash-flow loans where Axos was a small piece and both had non-bank agents; the decisions to charge them off were internal and not driven by any regulatory exam. On expenses, they said advertising spend will remain elevated to compete for deposits and fund growth. They also said a normalized run-rate for certain acquisition-related costs has been roughly $3 million to $5 million per quarter absent more deals.
"The advertising, marketing line item will stay elevated into the future from where it was over the past year." — Derrick Walsh (CFO)
Syndicated loan size and funding channels
Q (Kelly Motta · KBW): Asked how big the syndicated cash-flow (SNC) book is within loans and what other funding channels will support the low- to mid-teens loan growth target.
A: They said the cash-flow syndicated deals totaled $459 million of total loans and most of that book is pass rated and performing. For funding, they pointed to multiple channels: Axos One consumer product, small business accounts, savings depending on pricing, strong commercial deposits, a robust treasury management platform with API connectivity, and specialty businesses and cross-sell opportunities.
"The cash flow syndicated deals totaled $459 million of our total loans." — Derrick Walsh (CFO)
Why substandard loans fell and credit actions
Q (Timothy Coffey · Brean Capital): Noted substandard loans fell ~$100 million and asked what actions they are taking behind the scenes to improve credit quality.
A: They said the limited credit issues were concentrated in the cash-flow syndicated book and many of those loans were originated in a low-rate environment and are under pressure from recent large rate increases. Non-bank agent-led deals sometimes get more accommodations, so they are becoming more thoughtful by taking smaller positions in syndicated cash-flow deals and being skeptical of EBITDA adjustments and supply-chain risks. They added that real estate and structured credit continue to perform well.
"I mean I think that the relatively de minimis issues that we've had have been confined to the cash flow book." — Gregory Garrabrants (CEO)