SEC Filings

Axos Charges Off $73.9 Million In Loans, Mostly From Two Borrowers, As Loan Loss Reserve Drops To $304.4 Million

Net charge-offs hit 1.09% of loans versus 0.11% a year earlier, yet quarterly profit still rose to $129.6 million.

Matteo Parrino Jonathan Ponciano

Matteo Parrino, Jonathan Ponciano

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Axos Charges Off $73.9 Million In Loans, Mostly From Two Borrowers, As Loan Loss Reserve Drops To $304.4 Million

Axos Financial, the digital bank and securities clearing company, wrote off $73.9 million of loans last quarter, with two commercial borrowers behind most of it, according to its 10-Q filed Thursday. The losses pushed its allowance for credit losses on loans down to $304.4 million from $347.4 million at June 30, 2026, even as net income rose.

Two borrowers, $70.3 million

Of the total charge-offs, $70.3 million came from commercial and industrial loans outside real estate, and the filing says those were predominantly tied to two borrowers. The net charge-off rate rose to 1.09% of average loans, from 0.11% a year earlier.

The quarter's provision for loans was $27.7 million, against $15.3 million a year earlier. It mostly covered specific reserves on individually assessed loans in the same commercial and industrial portfolio. A release of reserves on commercial real estate loans and a $3.2 million benefit on unfunded commitments offset part of it, both tied to an improved macroeconomic outlook in the company's forecast model.

Chief Financial Officer Derrick Walsh said in the earnings release that Axos "charged off two non-performing C&I loans that we set aside specific loan loss reserves for in prior quarters." Excluding them, he said, annualized net charge-offs were 0.08%, and "we remain well-reserved."

Profit up, reserves thinner

Net income was $129.6 million, or $2.25 a share, against $112.4 million, or $1.94, a year earlier. Net interest income rose 13.8% to $331.3 million, and non-interest income climbed 97.3% to $63.8 million.

Nonaccrual commercial and industrial loans, which are not paying interest, stood at $72.0 million at September 30, 2026, down from $77.1 million at June 30. The prior 10-Q showed $98.1 million at March 31, 2026. The allowance now equals 1.16% of loans held for investment, versus 1.34% a year ago.

A digital bank with a clearing arm

Axos offers digital banking, securities clearing and custody, and investment advisory services. Its bank makes loans nationwide, including commercial and industrial loans and leases. The Verdant portfolio it bought is included in that category. During the quarter it also completed the purchase of about $1.8 billion of Capital One retirement-account deposits.

CEO Greg Garrabrants said a few large loans that failed to close in the September quarter should speed loan growth in the December 2026 quarter. Axos had about $30.8 billion in assets at September 30, 2026. Market value was $5.2 billion as of Thursday's report.

The December-quarter report will show whether the reserve held up and whether the large loans Garrabrants expects actually close.

Sources

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