Sign in
AF

Axos Financial, Inc. (AX)·Q3 2025 Earnings Summary

Executive Summary

  • Axos delivered solid Q3 FY25 results: diluted EPS of $1.81 (flat QoQ, down 5% YoY) on net income of $105.2M; net loan growth was strong at ~$706.9M, NIM compressed 5 bps to 4.78% as excess liquidity weighed on margin .
  • Versus estimates: EPS beat consensus by ~4% ($1.81 vs $1.735), while S&P Global “Revenue” missed ($294.3M vs $305.0M); 6 EPS and 5 revenue estimates contributed to the consensus* [GetEstimates].
  • Credit quality improved: non‑accrual loans fell to 0.89% of loans (from 1.26% in Q2), NPAs declined to 0.79% of assets; provision rose to $14.5M, driven by C&I growth and CECL macro inputs .
  • Management reiterated NIM ex-FDIC accretion at the high end of the targeted 4.25–4.35% and expects organic loan growth in the high single-digit to low‑teens range; buybacks continued ($28M in Q3 and another $30M in April) and the Board added $100M to the repurchase program on May 12, 2025, a potential stock support catalyst .

What Went Well and What Went Wrong

What Went Well

  • Robust loan growth: “We generated over $700 million in net loan growth, the strongest quarter so far in fiscal year 2025” – Greg Garrabrants, CEO .
  • Credit improvement: “Our credit quality remains good, with non‑performing and non‑accrual loans declining… compared to the linked quarter” – CEO .
  • Deposit cost management and NIM target: Deposit costs fell; management expects consolidated NIM ex‑FDIC accretion to stay at the high end of the 4.25–4.35% range .

What Went Wrong

  • Margin pressure: Consolidated NIM eased to 4.78% (−5 bps QoQ) as excess liquidity was a 13 bps drag; competitive spread compression (~3 bps) also weighed on NIM .
  • Provision higher: Provision for credit losses rose to $14.5M (vs $12.2M in Q2), primarily in C&I, reflecting loan growth and CECL macro variables (tariff fears, economic factors) .
  • Operating expense: Non‑interest expense increased to $146.3M YoY (+$13.0M) on higher salaries, processing, and FDIC/regulatory fees (though only +$0.9M QoQ) .

Financial Results

Income Statement and Profitability (Company-reported)

MetricQ1 2025Q2 2025Q3 2025
Net Interest Income ($USD Millions)$292.048 $280.099 $275.464
Non-interest Income ($USD Millions)$28.609 $27.799 $33.373
Total “Revenue” (NII + Non-interest) ($USD Millions)$320.657 $307.898 $308.837
Provision for Credit Losses ($USD Millions)$14.000 $12.248 $14.500
Net Income ($USD Millions)$112.340 $104.687 $105.206
Diluted EPS ($)$1.93 $1.80 $1.81
Adjusted EPS (Non-GAAP) ($)$1.96 $1.82 $1.81

Note: Company does not present “Total Revenue”; shown here as NII + Non‑interest income for comparability.

Margin and Efficiency

MetricQ1 2025Q2 2025Q3 2025
Net Interest Margin (%)5.17% 4.83% 4.78%
Interest Rate Spread (%)4.13% 3.91% 3.91%
ROA (%)1.92% 1.74% 1.77%
ROE (%)19.12% 16.97% 16.44%
Efficiency Ratio (%)45.99% 47.20% 47.36%

Balance Sheet and Credit KPIs

MetricQ1 2025Q2 2025Q3 2025
End-of-Period Deposits ($USD Millions)$19,973.329 $19,934.904 $20,136.714
Net Loan Growth ($USD Thousands)$49,224 $206,118 $706,903
Non‑accrual Loans / Total Loans (%)0.89% 1.26% 0.89%
NPAs / Total Assets (%)0.75% 1.06% 0.79%
ACL – Loans / Total Loans (%)1.35% 1.37% 1.37%

Segment P&L (Pretax)

Segment Pretax Income ($USD Millions)Q1 2025Q2 2025Q3 2025
Banking Business Segment$164.767 $152.884 $152.101
Securities Business Segment$9.078 $7.833 $9.137
Corporate/Eliminations$(14.653) $(10.387) $(13.162)

Results vs Wall Street Consensus (S&P Global)

MetricQ1 2025Q2 2025Q3 2025
EPS Actual ($)$1.93 $1.82 $1.81
EPS Consensus Mean ($)—$1.73833*$1.735*
EPS Surprise—+0.0817 (beat)*+0.0750 (beat)*
Revenue Actual ($USD Millions, S&P definition)—$295.650*$294.337*
Revenue Consensus Mean ($USD Millions)—$302.161*$305.044*
Revenue Surprise—−$6.51 (miss)*−$10.71 (miss)*

*Values retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Consolidated NIM ex-FDIC accretionNear-term“High end or slightly above” of 4.25–4.35% “Stay at the high end” of 4.25–4.35% Maintained (tone modestly conservative)
Organic Loan GrowthNext 12 monthsHigh single-digit to low‑teens High single-digit to low‑teens Maintained
Corporate Tax RateOngoing~29–30% ~29% in Q3; proposal could reduce FY26+ ETR by ~3% (noncash DTA remeasurement of ~$6–$7M upon enactment) Potential reduction FY26+
Capital ReturnOngoingOpportunistic buybacks; ATM shelf established in Q2 ~$28M repurchased in Q3 and ~$30M in April; +$100M authorization added May 12 Raised authorization

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 and Q2)Current Period (Q3)Trend
AI/Technology initiativesLow-code development and AI use cases to enhance efficiency; white-label banking rollout for advisers Building Axos professional workstation; active AI across workflows; modernizing Axos Invest infrastructure Expanding execution and scope
Tariffs/MacroCECL models weighted to stressed scenarios; unemployment long-term stressed inputs increased; macro uncertainty Tariff fears impacted CECL economic factors; cautious on certain C&I segments Continued macro caution
Deposit mix/pricingRepriced high-yield savings ahead of Fed cuts; growing low-cost commercial deposits Interest-bearing deposit costs down 36 bps QoQ; focus on Axos ONE bundled accounts and cross-sell Improving funding cost and mix
Product performanceHeadwinds in jumbo/multifamily/auto; pipelines improving Net declines minimal in jumbo/multifamily; strong originations in fund finance, equipment, lender finance Recovery underway
Regulatory/legalLitigation regarding syndicated C&I restructuring; ATM shelf for potential acquisitions Legal accrual reversal reduced G&A by ~$2M; CA tax proposal could lower ETR; continued evaluation of SNC issue Ongoing legal/tax developments
Securities/AAS growthNet new assets $559M in Q1; $822M in Q2; custody improvement Net new AAS assets $289M; client cash sorting volatility; platform consolidation to improve costs Continued growth with margin sensitivity

Management Commentary

  • “We generated over $700 million of net loan growth… stable net interest margins and a 19% year‑over‑year increase in book value per share.” – Greg Garrabrants, CEO .
  • “Our net interest margin remains above the high end of our target… we’ve been able to offset the gradual decline in our earning asset yields with corresponding decreases in our funding cost.” – CEO .
  • “Noninterest expenses were approximately $146 million… general and administrative expenses were down to $6.8 million… a payment of a legal judgment… resulted in a reduction… by approximately $2 million.” – Derrick Walsh, CFO .
  • “If [CA single sales factor] is enacted… deferred tax asset would decrease by ~$6–$7M… [and] effective tax rate for FY26 and beyond would be reduced by 3% ($5M per quarter).” – CFO .

Q&A Highlights

  • Loan growth and competition: Management is cautiously optimistic; spread compression evident in club deals, but pipelines strong across auto, multifamily, fund finance, equipment leasing; attrition headwinds in jumbo/multifamily are abating .
  • NIM trajectory: Excess liquidity a 13 bps drag; ~3 bps net spread compression; outlook to remain at high end of 4.25–4.35% ex‑FDIC accretion .
  • Provision/CECL drivers: C&I growth and stressed macro inputs (tariff fears) increased reserves; real estate portfolios supported by favorable HPI trends and conservative LTVs .
  • Fee income: Mostly core run-rate; minor one‑time DTC stock mark ($0.75M); paper statement fees seasonally boost Q2 .
  • Capital deployment: Continued buybacks (≈1% of shares repurchased including April); M&A lens favors specialty finance and custody; disciplined valuation and risk .

Estimates Context

  • EPS: Q3 EPS of $1.81 vs consensus $1.735 (beat); Q2 EPS of $1.82 vs consensus $1.738 (beat); 6 EPS estimates contributed each quarter* [GetEstimates].
  • Revenue (S&P definition): Q3 $294.3M vs consensus $305.0M (miss); Q2 $295.7M vs $302.2M (miss); 5 revenue estimates contributed each quarter* [GetEstimates].
  • Target Price: Consensus mean $100.5* [GetEstimates].
  • Note: S&P Global revenue definitions can differ from company presentation of net interest income plus non‑interest income; use S&P for estimate comparisons.

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Strong underlying growth: Broad-based loan growth and improving pipelines suggest volume acceleration into Q4, with jumbo and multifamily headwinds subsiding .
  • Margin resilience: Despite modest spread pressure and liquidity drag, deposit repricing and mix improvements support NIM at the high end of the 4.25–4.35% ex‑FDIC range; watch liquidity deployment for upside .
  • Credit quality stable-to-better: Sequential declines in non‑accruals/NPAs, conservative LTV structures, and idiosyncratic C&I exposures being actively managed; provision likely to reflect CECL macro inputs more than realized losses near term .
  • Capital return and authorization: Ongoing buybacks and a fresh $100M authorization provide downside support and flexibility for disciplined M&A; tangible book per share up to $42.91 (non‑GAAP) .
  • Watch fee sensitivity: Custody/clearing fee income benefits from net new assets but remains rate‑sensitive; platform consolidation and AI/low‑code initiatives should aid operating leverage over time .
  • Near-term trading setup: EPS beats vs consensus and visible credit improvement are positives; monitor revenue definition vs S&P, NIM cadence, and any headlines on the SNC litigation or CA tax enactment for volatility [GetEstimates] .

Additional Q3-relevant press releases and initiatives

  • Ascendion partnership to modernize Zenith banking platform with AI (enhancing operating efficiency and client experience) .
  • Middle Market Banking division launch led by veteran hire to expand commercial banking presence (deposit and treasury growth opportunity) .
  • $100M increase to stock repurchase program announced May 12, 2025 .