Axos Financial, Inc. · NYSE:AX
Axos Financial — IPO Roadshow (September 2020)
40 slides from Axos Financial's IPO roadshow presentation, Sep 15, 2020
Slide 1: Axos Financial, Inc. Investor Presentation September 2020
Filed Pursuant to Rule 433 Registration No. 333-223434 Issuer Free Writing Prospectus, dated September 15, 2020 Relating to Preliminary Prospectus Supplement dated September 15, 2020 and Prospectus dated March 2, 2018 Axos Financial, Inc. Investor Presentation September 2020 NYSE: AX
Slide 2: Safe Harbor
Safe Harbor This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Reform Act”). The words “believe,” “expect,” “anticipate,” “estimate,” “project,” or the negation thereof or similar expressions constitute forward-looki
Slide 3: Preliminary Term Sheet
Preliminary Term Sheet Issuer (Exchange: Ticker) Axos Financial, Inc. (NYSE: AX) Holding company fixed-to-floating Security Offered subordinated notes due 2030 Current Security Rating(1) Baa3 by Moody’s | BBB by Kroll Offering Type SEC Registered Term 10-year Non-call for 5 years; callable on any in
Slide 4: Strong and Experienced Management Team
Strong and Experienced Management Team Greg Garrabrants | President & CEO | Age: 48 Greg Garrabrants is President and CEO of Axos Bank. Before his senior executive roles at banking institutions, Greg served the financial services industry as an investment banker, management consultant, and attorney
Slide 5: Axos Financial is Positioned for the Future
Axos Financial is Positioned for the Future Axos Financial, Inc. ($ in millions) FY 2020 • Axos Financial, Inc. was founded in 2000 and is a customer‐focused Market Data as of 9/14/2020 diversified financial services company headquartered in Las Vegas, Market Capitalization$ 1,424.0 Nevada Price / T
Slide 6: Axos' Business Segments Provide the Foundation for Sustained Long-term Growth
Axos’ Business Segments Provide the Foundation for Sustained Long-term Growth Commercial: $5.4B deposits $5.5B loans Consumer Banking Consumer: Banking $545M Net Revenue(1) $5.9B deposits $5.0B loans 335,000 consumer and SMB clients (ex-HRB) Clearing and Custody: $6.0B assets under custo
Slide 7: Our Business Model is More Profitable Because Our Costs are Lower
Our Business Model is More Profitable Because Our Costs are Lower and Our Assets are Higher-Yielding Banks Greater Than Axos(1) $10bn(2) As % of average assets (%) (%) Net interest income 3.79% 2.42% Salaries and benefits 0.96% 1.07% Premises, equipment and 0.89% 1.23% other non-interest expense Tot
Slide 8: Over Years of Profitable Growth
Over 15 Years of Profitable Growth ($M) 200 183 180 155 160 152 140 135 119 120 100 83 80 56 60 40 40 29 21 21 20 3 3 3 4 7 - 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Net Income Net Income has continued to grow throughout multiple economic cycles 8 Note: Compan
Slide 9: Strong Efficiency Ratio Leads to Superior Profitability
Strong Efficiency Ratio Leads to Superior Profitability Net Income Efficiency Ratio $ Millions $183 51.12% 47.50% $155 $152 39.58% 36.08% $135 34.44% $119 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 Return on Average Assets Return on Average Equity 19.43% 17.78% 1.75% 1.68% 1.68% 17.05% 1.51%
Slide 10: Net Interest Margin Has Been Stable/Rising Through a Variety of Interest Rate Cycles
Net Interest Margin Has Been Stable/Rising Through a Variety of Interest Rate Cycles 4.50% 4.11% 4.12% 3.95% 4.07% 4.00% 3.91% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2016 2017 2018 2019 2020 Axos NIM - reported Fed Funds Rate 10 Note: Company uses a June 30 fiscal year-end.
Slide 11: Diversified Fee / Non-Interest Income
Diversified Fee / Non-Interest Income Fee Income / Revenue Fee Income Breakdown(1)(2) 25.0% Broker - Dealer 20.1% 22% 20.0% Mortgage Banking 17.4% 17.7% 16.9% 20% 16.2% 15.0% 10.0% Other 13% 5.0% Deposit / Service Fees 45% 0.0% 2016 2017 2018 2019 2020 Note: Company uses a June 30 fiscal year-end. F
Slide 12: Asset Quality Built to Withstand Economic Cycles
Asset Quality Built to Withstand Economic Cycles 1.42% 1.28% 1.09% 0.79% 0.77% 0.68% 0.69% 0.55% 0.52% 0.50% 0.42% 0.42% 0.43% 0.43% 0.36% 0.35% 0.23% 0.19% 0.19% 0.14% 0.08% 0.04% 0.03% 0.06% 0.06% 0.01% 0.02% (0.01%) 2009 2010 2011 2012 2013 2014 2015*** 2016 2017 2018 2019 2020 NCOs / Avg. Assets
Slide 13: Credit Investor Highlights
Credit Investor Highlights Experienced and “cycle-tested” management team Track record of credit discipline, risk management and profitability Differentiated digital platform Flexible, cost advantaged operational leverage Built to capitalize on digital financial services adoption Strong credit
Slide 14: Loan Portfolio and Credit Quality
Loan Portfolio and Credit Quality
Slide 15: Prudent Loan Growth With Low LTVs
Prudent Loan Growth With Low LTVs Net Loans – Last Five Quarters ($ in Millions) $14,000 $12,000 $10,373 $10,631 Loan Growth $10,141 $9,382 $9,784 Drivers $10,000 • Product $8,000 Expansion • Repeating Client $6,000 Relationships • Reputation for $4,000 Reliable Execution $2,000 $‐ Q4 2019 Q1 2020 Q
Slide 16: Diverse Lending Across Segments
Diverse Lending Across Segments Category Subcategory % of $ Millions Category Total ($M) Subcategory Total ($M) Total Jumbo Mortgage $4,243 38.8% C&I Lending Single Family $4,717 $3,189 Warehouse Lending $474 4.3% 29% Multifamily $1,892 17.3% Commercial Commercial $2,263 Real Estate Real Estate $2,2
Slide 17: Diverse Real Estate Mortgage Loans
Diverse Real Estate Mortgage Loans Mortgage Loans by State Mortgage Loans by Type $ Millions $ Millions Multifamily (1) Southern CA $1,892 $3,601 29% IL Other 55.3% $78 $510 Commercial 1.2% 7.8% HI Real Estate $79 $371 1.2% 6% Single Family WA $4,243 $81 65% 1.2% NY (2) FL $770 Northern CA $332 11.8
Slide 18: CRE: Small Balance Commercial Breakout
CRE: Small Balance Commercial Breakout Small Balance CRE $ Millions Multi-Tenant Medical Office Multi-Tenant $13 Office 3% $40 Retail 11% $121 33% Multifamily $37 10% Mobile Home Single Tenant Office $19 $9 5% (1) 2% Land Other $11 Hotel $12 3% 3% $75 20% Industrial Commercial Mixed-Use $11 $24 3% 7
Slide 19: C&I: Lender Finance and CRE Specialty Breakout
C&I: Lender Finance and CRE Specialty Breakout Lender Finance / Asset Backed Lending CRE Specialty $ Millions $ Millions Capital Call Backed $24 3% Asset-backed Hotel Loans Hotel Land Asset-backed $105 $546 $164 (1) $68 Other Loans 13% 25% 7% 3% $27 $134 3% 16% Retail $92 Single Family Multifamily 1
Slide 20: C&I: Equipment Finance
C&I: Equipment Finance Equipment Finance $ Millions Professional Services Other Transportation & $3 $2 Warehousing 2% 1% $4 2% Accommodation & Finance & Insurance Food Services $57 $4 37% 3% Manufacturing $5 3% Health C are & Social Assistance $20 Real Estate, Rental & 12% Leasing $34 22% Mining, Qu
Slide 21: Low Loan Deferrals
Low Loan Deferrals Loan Deferrals by Type Data as of 6/30/2020 Amount Deferred ($M) % of Category Loans C&I $5.6 0.2% Multifamily + CRE 0.0 0.0% Jumbo SFR 95.8 2.3% Auto 28.0 9.7% Consumer Unsecured 2.7 5.0% Total $132.1 1.2% 21
Slide 22: Holistic Credit Risk Management
Holistic Credit Risk Management What We Do Utilize a holistic credit-risk management framework to manage and monitor credit quality at each stage of the loan life cycle, and leverage specialized credit tools to optimize monitoring and reporting capabilities Credit Monitoring & Oversight Portfolio Sp
Slide 23: Allowance for Loan Losses
Allowance for Loan Losses Key Commentary Allowance by Loan Type $75.8M ALLL at 6/30/20 Amount of Total ALLL / 71 basis points of total loans and Allowance Loans Loans leases Subcategory ($M) ($M) (%) SFR Secured - Mortgage $24.0 $4,244.6 0.57% 10.7x net charge-offs ex-HRB- related Emerald Advanc
Slide 24: Deposit Strategy
QxXxOS Deposit Strategy
Slide 25: Core Deposit Growth Was Sufficiently Strong To Grow Overall Deposits
Core Deposit Growth Was Sufficiently Strong To Grow Overall Deposits While Changing The Deposit Mix Deposit Growth Deposit Composition $ Millions 6/30/2020 Commercial $1.7bn 25.8% $5.4bn Deposits 5-yr CAGR 12,000 11,337 11,000 Savings – IRA 20.6% 10,000 5-yr CAGR 8,983 Time deposits 2% 9,000 7,985 2
Slide 26: Significant Improvements To Deposits Mix
Significant Improvements To Deposits Mix Deposit Initiatives Core Deposits(1) (%) 90.0 Repositioned deposits with focus 80.0 on core deposits driven by 70.0 commercial relationships 60.0 50.0 40.0 2012 2013 2014 2015 2016 2017 2018 2019 2020 Non-Interest Bearing Deposits / Total Deposits (%) Strateg
Slide 27: Customer Base and Deposit Volume is Well Distributed Throughout the United States
Customer Base and Deposit Volume is Well Distributed Throughout the United States Average Deposit Balance Number of Accounts Axos Deposits Have National Reach With Customers in Every State 27
Slide 28: Diversified Deposit Gathering
Diversified Deposit Gathering Serves 40% of U.S. Chapter 7 bankruptcy trustees in exclusive relationship Software allows servicing of SEC $ Millions receivers and non-chapter 7 cases Full service digital banking, wealth management, and securities trading Fiduciary Consumer Services Direct $1,0
Slide 29: Capital, Asset-Liability Management, Interest Rate Management and Liquidity
Capital, Asset-Liability Management, Interest Rate Management and Liquidity
Slide 30: Investment Securities Composition
Investment Securities Composition Agency MBS 9% Non-Agency MBS 10% Agency Non-RMBS 1% Municipal ABS and 5% Structured 75% Total FMV of Securities: $187 Million 30
Slide 31: IRR / Rate Sensitivity Analysis
IRR / Rate Sensitivity Analysis Net Interest Income(¹) Market Value of Equity(2) $ Millions $ Millions $503 $1,347 $1,379 $456 $1,261 $432 $434 $418 $1,162 $403 18.7% $977 15.9% 10.1% 10.5% 8.6% 9.4% 7.2% 8.5% 0.0% -100 bps Base +100 bps +200 bps +300 bps (16.0%) -200 bps Base +200 bps % Change from
Slide 32: Diversified Funding and Liquidity
Diversified Funding and Liquidity Off Balance Sheet Funding* Axos Fiduciary Services - $37 million Axos Clearing - $450 million FHLB - $4.6 billion Federal Reserve Discount Window - $1.8 billion Pro Forma Consolidated Capital Ratios* Standalone Pro Forma for $100 million 13.60% subordinated debt rai
Slide 33: Historical Interest Coverage
Historical Interest Coverage Pro Forma(1) $ Thousands 2016 2017 2018 2019 2020 FY 2020 Investment in subsidiaries $ 657,119 $ 804,803 $ 905,159 $ 1,106,078 $ 1,253,502 $ 1,340,802 Consolidated equity 683,590 834,247 960,513 1,073,050 1,230,846 1,230,846 Double leverage ratio 96% 96% 94% 103% 102% 10
Slide 34: Appendix
QxXxOS Appendix
Slide 35: Axos Securities Overview
Axos Securities Overview Monetizing synergies by integrating Banking products and services to Securities customers, RIAs, and IBDs Consumer Banking Axos Clearing 62 IBDs Consumer Deposit Accounts Securities Clearing & 110,000 Clients ODL/Margin Accounts Custody Jumbo Single Family Mortgage Loans Axo
Slide 36: Securities Strategy
Securities Strategy Leveraging Bank’s existing digital platforms allows for a unique integrated and flexible Banking and Securities product features Onboard Clients Rich Banking and “Single-Pane” Faster Securities features Independent RIAs Universal Universal Introducing End Clients Broker-Dealers E
Slide 37: Ratings Profile
Ratings Profile Moody’s Ratings Type Rating Outlook Axos Financial, Inc. Long-term Issuer Rating Baa3 Stable Subordinate Regular Bond / Debenture Baa3 N/A Subordinate Shelf Baa3 N/A Senior Unsecured Shelf Baa3 N/A Axos Bank Long-term Issuer Rating Baa3 Stable Adjusted Baseline Credit Assessment baa2
Slide 38: Select Financials FY 2016-FY 2020
Select Financials FY 2016-FY 2020 FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 CAGR Selected Balance Sheet Data ($M) Total Assets $7,599.3 $8,501.7 $9,539.5 $11,220.2 $13,851.9 16.2% Loans Held for Sale, at Fair Value 20.9 18.7 35.1 33.3 52.0 25.6% Allowance for Loan Losses 35.8 40.8 49.2 57.1 75.8 20.6%
Slide 39: Non-GAAP Reconciliation
Non-GAAP Reconciliation $ Millions, except per share data FY 2016 FY 2017 FY 2018 FY 2019 FY 2020 Total common equity (GAAP) $678.5 $829.2 $955.5 $1,068.0 $1,225.8 Less goodwill and other intangible assets 0.0 0.0 67.8 134.9 125.4 Less mortgage servicing rights, carried at fair value 3.9 7.2 10.8 9.
Slide 40: Contact Information
Contact Information Greg Garrabrants, President and CEO Andy Micheletti, EVP/CFO investors@axosfinancial.com www.axosfinancial.com Johnny Lai, VP Corporate Development and Investor Relations Phone: 858.649.2218 Mobile: 858.245.1442 jlai@axosfinancial.com