DEF: Axos Financial Reports Strong FY25, Proposes Equity Plan Boost

Axos Financial, Inc. announces robust fiscal year 2025 financial results, including record net income and diluted EPS, alongside proposals for its annual stockholder meeting.

Summary

• Axos Financial, Inc. will hold its 2025 Annual Meeting of Stockholders on Thursday, November 13, 2025, at 2:00 PM Pacific Time, at its corporate headquarters in Las Vegas, NV.
• Stockholders as of September 16, 2025, are entitled to vote on four key proposals.
• The company reported strong fiscal year 2025 financial results with net income over $430 million and diluted earnings per share of $7.43.
• Key proposals include the election of four Class III directors, an advisory vote on Named Executive Officer compensation, approval of an amendment to the 2014 Stock Incentive Plan, and ratification of BDO USA, P.C. as the independent auditor for fiscal year 2026.
• The proposed amendment to the 2014 Stock Incentive Plan seeks to increase the share reserve by 1,000,000 common shares to a total of 7,780,000 and extend the plan's termination date to September 1, 2031.
• The company's executive compensation program is heavily performance-based, with 93.9% of the CEO's FY2025 compensation and 79.9% of the average NEO's FY2025 compensation tied to performance.
• Axos Financial repurchased $58 million of common stock in fiscal year 2025 at an average price of $61.40, compared to a record date price of $88.24.

Sentiment

Score: 9

Explanation: The filing presents exceptionally strong financial performance across multiple key metrics, including net income, EPS, ROE, and loan/deposit growth. The company consistently outperforms industry benchmarks in shareholder returns and maintains a cost-efficient compensation structure. The proposed equity plan amendment is framed as a strategic move for talent retention and growth, despite potential dilution. Overall, the tone is highly positive, emphasizing sustained growth and shareholder value creation.

Positives

• Net income exceeded $430 million in fiscal year 2025, demonstrating strong profitability.
• Diluted Earnings per Share (EPS) reached $7.43, indicating robust per-share earnings.
• Year-over-year deposit growth was 7.6%, increasing deposits by $1.4 billion to $20.8 billion.
• Total net loans grew by 9.5% year-over-year, reaching $21.0 billion.
• Net Interest Margin (NIM) improved by 28 basis points to 4.90% in fiscal year 2025 from 4.62% in fiscal year 2024.
• Return on Equity (ROE) was 17.30% and Return on Average Assets (ROAA) was 1.82% for fiscal year 2025.
• The company achieved strong five-year compound annual growth rates (CAGR) for net income (18.8%), revenue (16.7%), diluted EPS (20.0%), book value per common share (18.2%), deposits (13.0%), and loans (14.7%).
• Axos Financial's common stock provided a 344% total return to investors over the last five fiscal years (July 1, 2020 June 30, 2025), significantly outperforming the NYSE Index (193%) and the ABA NASDAQ Community Bank Total Return Index (XABQ) (180%).
• The CEO's total return since appointment in October 2007 is 4,201%.
• The company was named to the 2025 Forbes America's Best Banks list and received the 2025 KBW Bank Honor Roll Award for the fourth consecutive year.
• The executive compensation program is heavily performance-based, with 93.9% of the CEO's and 79.9% of the average NEO's FY2025 compensation tied to performance metrics.
• The company strategically repurchased $58 million of common stock at an average price of $61.40, below the record date price of $88.24, indicating value creation for shareholders.
• The company's Bank salaries and benefits, including equity compensation, were 0.91% of average assets, significantly lower than the peer ratio of 1.34% for banks with over $1 billion in assets, saving approximately $103 million annually compared to peers.
• Approximately 82% of the U.S. workforce has direct or indirect equity ownership in the company, aligning employee interests with stockholders.

Negatives

• No explicitly stated negative financial results or operational setbacks were highlighted in the filing.

Risks

• The classification of the Board of Directors into three classes may delay or prevent changes in control or management.
• The potential dilution from the proposed 1,000,000 additional shares for the 2014 Stock Incentive Plan, although managed by share repurchases, could still impact existing shareholder value.
• Executive compensation, particularly for the CEO, is highly dependent on the company's stock price performance, which is subject to external market factors.
• The CEO's employment agreement includes a negative carryforward for both cash and equity incentives, meaning underperformance in one year can reduce future compensation, which could be a risk to executive retention if prolonged.
• The company's insider trading policy prohibits speculative securities transactions, short sales, derivatives, and pledging company securities without prior written consent, indicating potential risks associated with such activities if not controlled.

Future Outlook

The company's compensation programs are designed to promote business strategies and long-term success by attracting, motivating, and retaining key executives. The proposed amendment to the 2014 Stock Incentive Plan is intended to manage equity compensation needs for the next two to three years and opportunistically hire talent to accelerate existing and new businesses. Management expects an increase in revenue for the Securities Business segment due to recent acquisitions and organic growth.

Management Comments

• "On behalf of the Board of Directors and management of Axos Financial, Inc., you are cordially invited to attend the 2025 Annual Meeting of Stockholders of the Company."
• "Your participation in Company activities is important, and we encourage you to attend the meeting."
• "On behalf of the Board of Directors and all of the employees of the Company, we thank you for your continued support."
• "The Company demonstrated strong performance and shareholder value with: Net Income of Over $430 million Diluted Earnings per Share (EPS) of $7.43 YoY Deposit Growth of 7.6% Return on Equity 17.30% YoY Total Net Loans 9.5% Improved Net Interest Margin by 28 basis points to 4.90% in fiscal year 2025 compared to 4.62% in fiscal 2024. Continued Strong Credit Performance with net charge-offs to average loans of only 13 basis points in fiscal year 2025."
• "Our compensation approach more strongly ties our employees interests with that of our stockholders."
• "We believe our program appropriately incentivizes and rewards our employees and has been effective in aligning our employees interest with those of other stockholders as evidenced by the Company’s strong financial and stock performance."
• "Achieving superior long-term results for our stockholders has always been one of our primary objectives and, therefore, it is essential that employees think and act like owners of the Company."
• "Stock ownership helps enhance the alignment of the long-term economic interests of our employees with those of our stockholders."

Industry Context

Axos Financial operates as a leading technology-oriented financial institution in a highly competitive and dynamic industry, competing for executive talent with commercial banks, investment banks, financial technology start-ups, and technology companies. The company's performance metrics, such as its 17.30% Return on Average Equity, are rigorous and approximate the 97th percentile of exchange-traded banks, indicating superior performance relative to industry peers. Its total shareholder return significantly outpaced both the NYSE Index and the ABA NASDAQ Community Bank Total Return Index over the past five years. The company's compensation expense as a percentage of average assets is notably lower than its peer group, suggesting a more efficient cost structure while still achieving strong financial results.

Comparison to Industry Standards

• Axos Financial's 17.30% Return on Average Equity for fiscal year 2025 is considered a highly rigorous performance metric, initially set to approximate the 97th percentile of 812 exchange-traded banks tracked by SNL Financial Global Market Intelligence.
• The company's 5-year total shareholder return of 344% (7/1/2020 6/30/2025) significantly outperformed the U.S. NYSE Index (193%) and the ABA NASDAQ Community Bank Total Return Index (XABQ) (180%).
• For fiscal year 2025, Axos's total shareholder return of 33% exceeded the NYSE Index (16%) and the XABQ (21%).
• The CEO's base salary of $700,000 is at the 8th percentile of the peer group, indicating a lower fixed compensation compared to many peers.
• The company's Bank salaries and benefits, including equity compensation, were 0.91% of average assets, which is substantially lower than the peer ratio of 1.34% for banks with greater than $1 billion in assets, implying a cost saving of approximately $103 million per year compared to peers of similar asset size.
• The 3-year gross burn rate for equity awards is 1.55%, and the net burn rate is 1.01%. This compares favorably to the Institutional Shareholder Services Inc. (ISS) benchmarks for banks (1.05% gross burn rate) and is significantly lower than diversified financial services (3.68% gross burn rate), especially considering Axos's compensation mix leans more towards equity.
• Approximately 82% of the company's U.S. workforce has direct or indirect equity ownership, which is believed to be a much greater ownership level than its peers, fostering stronger alignment with stockholder interests.

Management Changes

Corporate Governance

Related Party Transactions

• The Bank makes loans and engages in other banking transactions with its directors, officers, employees, and their associates in the ordinary course of business.
• These transactions, excluding the Loan Program, are generally on the same terms as those for comparable transactions with unaffiliated persons of comparable creditworthiness.
• The Bank offers an employee loan program (Loan Program) for primary residence financing (purchase, construction, maintenance, or improvement) with terms of 9 to 30 years at below-market interest rates.
• Below-market rates in the Loan Program are partly attributable to a pledge by the borrower of acceptable collateral, which may include Company stock.
• Outstanding loans to all directors and executives participating in the Loan Program made up approximately 31% of the total balance outstanding for the program as of June 30, 2025.
• As of June 30, 2025, none of the loans under the Loan Program or to directors or officers were classified as non-accrual, past due, restructured, or potential problem loans.
• Specific examples of loans under the Loan Program include: Gregory Garrabrants ($8,089.5k outstanding at 0.43% interest), James S. Argalas ($6,734.6k outstanding at 1.02% interest), Paul J. Grinberg ($5,072.1k outstanding at 0.56% interest, construction loan), Andrew J. Micheletti ($2,684.4k outstanding at 2.89% interest), David Park ($1,258.1k outstanding at 0.43% interest), Thomas Constantine ($1,162.6k outstanding at 0.39% interest), Brian Swanson ($1,152.3k outstanding at 0.43% interest), Derrick K. Walsh ($849.7k outstanding at 0.41% interest), Nicholas Mosich ($665.5k outstanding at 0.43% interest), Eshel Bar-Adon ($608.6k outstanding at 0.43% interest), Raymond Matsumoto ($453.1k outstanding at 0.43% interest), and John Tolla ($415.4k outstanding at 0.43% interest).

Stakeholder Impact

• **Shareholders**: Expected to benefit from strong financial performance, outperformance against market indices, and a compensation structure designed to align executive interests with long-term shareholder value. The share repurchase program also directly benefits shareholders. Potential dilution from the increased stock incentive plan is a consideration, though mitigated by historical share repurchases and a focus on retention and growth.
• **Employees**: The proposed amendment to the 2014 Stock Incentive Plan aims to attract, motivate, and retain employees by providing equity compensation, with 100% of eligible US-based full-time employees receiving RSUs. This fosters a sense of ownership and aligns their interests with the company's long-term success. The company's lower compensation expense ratio compared to peers suggests efficient resource allocation that still rewards employees through equity.
• **Customers**: Continued strong financial performance, growth in loans and deposits, and strategic expansion into securities business segments suggest a stable and growing financial institution capable of serving its customer base effectively.
• **Management**: Executive compensation is heavily tied to performance, incentivizing strong financial results and strategic objectives. Stock ownership guidelines and long-term equity awards ensure alignment with shareholder interests and retention of key talent.
• **Regulatory Authorities**: The company emphasizes compliance with legal and regulatory requirements, with robust risk oversight from the Board and its committees, including regular updates on risk management practices and results of regulatory examinations.

Next Steps

• Stockholders to vote on the election of four Class III directors at the Annual Meeting on November 13, 2025.
• Stockholders to cast a non-binding advisory vote on Named Executive Officer compensation.
• Stockholders to vote on the approval of an Amendment to the Amended and Restated 2014 Stock Incentive Plan.
• Stockholders to ratify the selection of BDO USA, P.C. as the independent registered public accounting firm for fiscal year 2026.
• The company will continue its engagement with stockholders on executive compensation matters.
• The company intends to register additional shares under the Amended Plan with the SEC as soon as practicable following stockholder approval.

Key Dates

Recommendation

The filing reveals exceptional financial performance for fiscal year 2025, with significant growth in net income, EPS, loans, and deposits, coupled with improved net interest margin and strong credit quality. The company consistently outperforms its industry peers in total shareholder return over both short and long-term horizons. Management's compensation structure is heavily performance-based and aligns executive interests with long-term shareholder value, while also demonstrating cost efficiency compared to peers. The strategic share repurchase program further underscores a commitment to returning value to shareholders. While the proposed increase in the stock incentive plan could lead to some dilution, it is presented as a necessary tool for talent retention and growth, and the company has a history of offsetting dilution through repurchases. The overall picture is one of a well-managed, high-performing company with a clear strategy for continued success, making it a strong investment opportunity.

Keywords

Axos Financial, SEC Filing, Proxy Statement, Executive Compensation, Stock Incentive Plan, Corporate Governance, Financial Performance, Bank, Loans, Deposits, Shareholder Return, Risk Management, Board of Directors, Equity Awards, Financial Services, Banking Industry