Axos Financial (AX) Q1 Earnings call transcript Oct 30, 2025
2min read Axos Financial, Inc., a leading financial services provider, showcased its robust performance in the first quarter of fiscal 2025, recording double-digit year-over-year growth in earnings per share and book value per share for the tenth consecutive quarter. This impressive feat underscores the company's ability to navigate the complex financial landscape with agility and strategic foresight.
Financial Highlights
The company's financial performance was driven by a 10% increase in deposits, which now stand at $20.3 billion, demonstrating the confidence of investors in Axos Financial's financial stability and growth prospects. Loan balances also grew by 13.7% year-over-year, reaching $19.3 billion, indicating a healthy loan portfolio and a strong lending environment.
Axos Financial reported a net interest margin of 5.17% for the quarter ended September 30, 2024, representing a significant increase from the previous quarter. This growth was largely attributed to the payoff of three loans acquired from the FDIC, which boosted the net interest margin by 81 basis points. Excluding these loans, the net interest margin was 4.87%.
Strategic Expansion and Operational Efficiency
Axos Financial's strategic expansion was evident in its diversification of funding sources, with 70% of its loans floating, 23% hybrid, and 7% fixed. This strategic approach allows the company to effectively manage its interest rate risk and maintain a healthy balance sheet.
The company also reported a 19.1% return on average common equity, reflecting its strong financial health and profitability. Axos Financial's tangible book value per share grew by 28% year-over-year, underscoring its solid financial footing and ability to generate shareholder value.
Challenges and Opportunities
Despite the impressive financial performance, Axos Financial faced challenges in certain areas, particularly in nonperforming assets. Nonperforming assets in the single-family jumbo mortgage portfolio increased by $13.3 million from June 30, 2024, due to three loans with an average loan-to-value of 45%. Similarly, nonperforming assets in the commercial real estate loan book increased by $14.5 million, driven by three loans to one borrower with a weighted average LTV of 29%.
However, the company remains optimistic about its future prospects, with a strong focus on addressing these challenges and continuing to grow its business. Axos Financial's diversified mix of lending and funding, coupled with its asset-based lending philosophy, positions it well to weather any potential economic downturns.
Looking Ahead
In the coming quarters, Axos Financial plans to maintain its focus on loan growth and operational efficiency. The company expects to grow loan balances organically by high single digits to low teens year-over-year, excluding any loan portfolio purchases or acquisitions. This growth is expected to be driven by the company's diversified lending and deposit businesses, as well as its strategic investments in technology and talent acquisition.
Earnings Call Insights
During the earnings call, key shareholders and investors expressed concerns about competition in certain lending verticals and the potential impact on pricing and growth. Axos Financial's management team acknowledged these challenges but expressed confidence in its ability to maintain its competitive edge through strategic hiring and pricing strategies.
The company's focus on deposit growth, particularly in the securities business, is expected to be a key driver of future success. Axos Financial's white-label banking platform, which enables advisers to offer deposit and lending products to their clients, is a strategic move aimed at expanding its reach and deepening its relationships with financial advisers.
Conclusion
Axos Financial's strong financial performance in the first quarter of fiscal 2025, coupled with its strategic expansion and operational efficiency, positions the company well for future growth and success. Despite the challenges faced in certain areas, Axos Financial remains optimistic about its prospects, driven by its diversified business model, strong financial health, and strategic focus on growth and innovation.
