Axos Financial, Inc. · NYSE:AX
Axos Financial — Q1 2023 Earnings Presentation
40 slides from Axos Financial's earnings presentation, Oct 27, 2022
Slide 1: Axos Financial, Inc. Investor Presentation
Axos Financial, Inc. Investor Presentation October 31, 2022 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 use of future tense or words “future plans,” “believe,” “expect,” “anticipate,” “estimate,” “project,” or the negation thereof or simil
Slide 3: Axos' Business Model is Differentiated From Other Banks
Axos’ Business Model is Differentiated From Other Banks Customer Sales Servicing Distribution Acquisition • Digital Marketing • Automated • Self-service • Balance sheet fulfillment • Affinity and • Digital journey • Whole loan sales Distribution • Inbound call center options • Direct banker (call Pa
Slide 4: 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 Bank1 $10bn2 As % of average assets (%) (%) Net interest income 4.48% 2.43% Salaries and benefits 0.81% 1.04% Premises, equipment and 1.07% 1.16% other non-interest expense3 T
Slide 5: Axos Financial's Three Divisions Provide the Foundation for Sustained Long-term Growth
Axos Financial’s Three Divisions Provide the Foundation for Sustained Long-term Growth Investment Thesis › Diverse mix of asset, deposit, and fee income reduces risk and provides multiple growth opportunities in varying environments Consumer Banking › Differentiated retail digital strategy from “onl
Slide 6: Consolidated Fiscal 2023 First Quarter Highlights
Consolidated Fiscal 2023 First Quarter Highlights Compared with Fiscal 2022 First Quarter Asset Growth Deposit Growth $ Millions $ Millions 20,000 20,000 18,407 15,177 29.2% 14,907 23.5% 15,000 11,747 15,000 10,000 10,000 5,000 5,000 0 0 Q1 2022 Q1 2023 Q1 2022 Q1 2023 Diluted EPS Net Income $ Milli
Slide 7: Diluted EPS and Book Value Per Share Have Been Consistently Strong
Diluted EPS and Book Value Per Share Have Been Consistently Strong Diluted EPS (FY) Book Value Per Share (FY) $ per share $ per share 4.50 30.00 27.48 3.97 4.00 16.1% CAGR 23.62 13.6% CAGR 3.56 25.00 3.50 20.56 2.98 20.00 3.00 17.47 2.37 2.48 15.24 2.50 2.10 15.00 13.05 2.00 1.50 10.00 1.00 5.00 0.5
Slide 8: 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* Stable Net Interest Margin 3.92% 4.13% 3.90% 3.84% 3.76% 3.83% 2.40% 1.91% 1.60% 0.08% 0.08% 0.26% 2017 2018 2019 2020 2021 2022 NIM Effective Fed Funds rate * NIM excludes impact of HRB; relationship with HRB term
Slide 9: Loan Portfolio More Sensitive to Rate Increases Today
Loan Portfolio More Sensitive to Rate Increases Today Compared to Last Fed Fund Rate Hike Starting in 2015 September 30, 2015 September 30, 2022 Variable rate Fixed Fixed 9% 12% 9% Variable rate 53% 38% Hybrid 80% Hybrid 9
Slide 10: Interest Rate Components of Loan and Lease Portfolio
Interest Rate Components of Loan and Lease Portfolio* At September 30, 2022 Mix of Loan Repricing Types Fixed/Hybrid Years to Maturity / Repricing $M 8,000 7,095 Fixed 6,959 6,972 7,000 9% 5,821 6,000 5,000 4,000 Variable Hybrid 2,930 53% 3,000 38% 1,635 2,000 710 1,000 382 - Years 1/2 1 2 3 5 10 20
Slide 11: Optionality with Deposits from Axos Securities
Optionality with Deposits from Axos Securities Securities segment provides on average approximately $2.5 billion of deposits that can be brought on balance sheet or pushed to partner banks to generate fee income › Provides stable, low/no-cost deposits that can be used to fund Axos Bank’s loan growth
Slide 12: Axos is a Top Performer Versus Bank Peer Group
Axos is a Top Performer Versus Bank Peer Group Axos Bank Peer Group Percentile ROAA 1.62% 0.73% 89% Return on equity 16.80% 7.32% 89% G&A 1.99% 2.36% 28% Efficiency ratio 42.74% 67.19% 7% The 89% on ROE means that the Bank outperformed 89% of all banks. The 7% efficiency ratio ranking means that onl
Slide 13: Loan Growth by Category for First Quarter Ended September 30, 2022
Loan Growth by Category for First Quarter Ended September 30, 2022 $ millions Q1 FY23 Q4 FY22 Inc (Dec) Single Family Jumbo Mortgage $3,833 $3,708 $125 Mortgage & Warehouse SF Warehouse Lending 177 281 (104) Multifamily & Multifamily 2,127 2,085 42 Commercial Mortgage Small Balance 45 838 793 Commer
Slide 14: Prudent Loan Growth With Low LTVs
Prudent Loan Growth With Low LTVs Net Loans – Last Five Quarters ($ in Millions) $16,000 $15,212 $14,091 $14,000 $13,094 $12,607 Loan Growth $11,879 Drivers $12,000 • Product $10,000 Expansion • Repeating Client $8,000 Relationships $6,000 • Reputation for Reliable $4,000 Execution $2,000 $- Q1 2022
Slide 15: Strong Loan Origination Growth
Strong Loan Origination Growth Fiscal Year Loan Originations Future Plans $ Billions › Organic growth in existing 12 11.1 business lines 11 14.5% 5-yr CAGR 0.7 • Multifamily geographic 10 expansion 9 8.4 8.4 8.1 • Agency and jumbo 8 7.5 1.5 mortgage channel 1.6 1.6 7 expansion 5.6 1.6 6 • Small Bala
Slide 16: Diversified Deposit Gathering
Diversified Deposit Gathering ‹ Serves approximately 40% of U.S. Chapter 7 bankruptcy trustees in exclusive relationship ‹ Software allows servicing of SEC receivers ‹ Full service digital banking, wealth and non-chapter 7 cases management, and securities trading Fiduciary Consumer Services Direct $
Slide 17: Deposit Growth in Checking, Business, and Savings
Deposit Growth in Checking, Business, and Savings Was Achieved While Transforming the Mix of Deposits June 30, 2013 September 30, 2022 100% of Deposits = $2.1 billion 100% of Deposits = $15.2 billion Checking and Savings – IRA other demand Time deposits deposits 2% 8% 19% Checking and other demand 2
Slide 18: Customer Base and Deposit Volume is Well Distributed Throughout the United States
Customer Base and Deposit Volume is Well Distributed Throughout the United States Average Deposit Balance Number of Accounts Axos Deposits Have National Reach With Customers in Every State 18
Slide 19: Commercial Loans and Deposits
Commercial Loans and Deposits Spot Balance ($B’s) $12.0 $10.0 $9.67 $8.0 29.5% CAGR $6.0 $6.45 $4.0 $4.45 28.9% CAGR $3.01 $2.0 $0.0 Jun-19 Jun-22 Loans Deposits Loan Growth Drivers Deposit Growth Drivers • Product Expansion • Unique value proposition • Repeating Client Relationships encompassing in
Slide 20: Non-Interest Income Growth and Diversification
Non-Interest Income Growth and Diversification Year Ended Three Months Ended June 30, 2019 September 30, 2022 100% of Non-Interest Income = 100% of Non-Interest Income = $82.9 million $108.8 million* Prepayment Prepayment Penalty Penalty Banking and 4% 7% Gain on Sale Services Fee 11% Advisory Fee**
Slide 21: Axos Securities Overview
Axos Securities Overview Monetizing synergies by integrating Banking products and services to Securities customers, RIAs, and IBDs Consumer Banking Axos Clearing 71 IBDs Consumer Deposit Accounts Securities Clearing & 208 RIAs 310,000 Clients ODL/Margin Accounts Custody Jumbo Single Family Mortgage
Slide 22: Integrated Securities and Banking
Integrated Securities and Banking Leveraging Bank’s existing digital platforms allows for a unique integrated and flexible Banking and Securities product features Rich Banking, Onboard Clients Unified Service “Single-Pane” Securities, and Faster Model Crypto Features Salesforce Universal Universal S
Slide 23: Axos Clearing and Custody Highlights
Axos Clearing and Custody Highlights Leadership team with more June 2023 annualized based on 3 months 9/30/22 than 100 years combined Net Interest Income (Expense) Securities Lending <1% industry experience Margin Lending 10% 3% 21% Custody More than 277 employees across Clearing and Custody N
Slide 24: Secular Industry Trends Provide Opportunities for Axos
Secular Industry Trends Provide Opportunities for Axos • RIAs need to reduce costs and streamline back- Fee Compression for office ops Active and Passive • Automation frees up > time/resources for client interactions Investment Managers Advisors are Leaving • Axos to provide bundled securities clear
Slide 25: Axos Advisor Services (AAS) At A Glance
Axos Advisor Services (AAS) At A Glance Liberty Provides a Comprehensive Turnkey Platform Performance Unified Serving 176 RIAs1 Reporting Managed ($1M+ AUC) Accounts Easy Fee Billing Rebalancing ~$21B Assets Under Custody2 Tax Automatic Management Reconciliation Tools TAMPs Traditional Small RIAs RI
Slide 26: Axos Clearing Revenue Sensitivity to Key Metrics
Axos Clearing Revenue Sensitivity to Key Metrics Increase in revenue related to key metrics – Illustrative Axos Clearing – excluding AAS AUC Increase Lending Balances Margin Balances Sec Lending Balances $6.11M $12.2M Revenue $11.00M Revenue $4.59M $9.15M $8.25M $3.06M $6.1M $5.50M $1.53M $3.05M $2.
Slide 27: Axos Clearing Long-Term Revenue and Expense Synergies
Axos Clearing Long-Term Revenue and Expense Synergies Revenue Synergies* Cost Synergies* Axos Securities: Axos Securities: • Margin Loans • Self-Clearing • Securities Lending Axos Custody • Regulatory/Compliance • Fixed Income Trading • Client Acquisition Costs • Order Flow • Customer Service • Whit
Slide 28: Axos Clearing Revenue Expansion
Axos Clearing Revenue Expansion Leveraging lower-cost platform accelerates strategy to drive higher and more diverse revenues New Growth Initiatives Est. Revenue Contribution of New Growth Initiatives Investment in build out of FY2023 (%) Sales teams to cover Total Fees 41 growth markets including
Slide 29: Axos Invest Managed Portfolios Overview
Axos Invest Managed Portfolios Overview Digital advisor that helps consumers achieve their investing goals Core through asset allocation, diversification, and low-cost ETFs. Services Automatic Rebalancing and Tax Loss Harvesting Services. Generate recurring revenue streams on assets under mana
Slide 30: Axos Invest Self Directed Trading Overview
Axos Invest Self Directed Trading Overview Competitive price discovery and execution of equity, options, ETFs, and Core Mutual Funds integrated with our Universal Digital Banking platform. Services Access to third-party research, alerts, and watch lists. Subscription Program: $10 monthly for e
Slide 31: Axos Invest Managed Portfolios Industry Comparison
Axos Invest Managed Portfolios Industry Comparison ad Attributes Axos SoFi Betterment Fidelity Go Simple asset Low-cost, integrated Simple ETF allocation allocation and Bank, Borrow, and bundled with SoFi Simplified choice for rebalancing model Business Model and Invest financial suite – loans and f
Slide 32: Key Goals of Universal Digital Bank
Key Goals of Universal Digital Bank › Increase chances of offering right product at the right time and Personalization place › Personalization is the right antidote for too much choice, too much content, and not enough time › Eventual artificial intelligence tools assist sale of banking products suc
Slide 33: Evolving Capabilities of the UDB Platform
Evolving Capabilities of the UDB Platform UDB offers a growing set of products, capabilities and supported user segments UDB 1.0 UDB 2.0 White Label UDB Banking: Axos deposit products Products + Features Borrowing: Axos loan products Investing: Managed Portfolios, Self Directed Trading, Crypto Plann
Slide 34: The Digital Experience Roadmap
The Digital Experience Roadmap We continue to evolve our digital experience and provide modern solutions so financial services providers can have the speed, scalability, and flexibility they need to deliver better client experiences White Label Universal Digital Bank White Cryptocurr Label ency Enro
Slide 35: Axos Digital Assets
Axos Digital Assets Vision Empower consumers with a secure crypto trading environment that unifies with everyday banking and brokerage. Provide a flexible blockchain powered platform for issuance, trading, clearing, settlement, payment, and custodianship for digital instruments. Approach Retail
Slide 36: 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 Loan Life Po
Slide 37: Annualized Charge-offs (Recoveries) to Average Loans Outstanding
Annualized Charge-offs (Recoveries) to Average Loans Outstanding % 0.25 0.23 0.20 0.19 0.19 0.15 0.10 0.08 0.06 0.06 0.05 0.02 0.02 0.02 0.01 0.00 -0.05 FY18 FY19 FY20 FY21 FY22 With HRB Without HRB Note I: Company uses a June 30 fiscal year-end. Note II: The Company partnered with H&R Block Bank (H
Slide 38: Change in Allowance for Credit Losses (ACL) & Unfunded Loan Commitments Reserve
Change in Allowance for Credit Losses (ACL) & Unfunded Loan Commitments Reserve (UCL) ($ in millions) 170 1.3 (2.4) 8.8 11.0 160 0.5 11.0 150 140 155.5 148.6 130 120 June 30, 2022 Gross Gross Provisions for Sept 30, 2022 ACL + UCL Charge-offs Recoveries credit losses ACL + UCL ACL UCL 38
Slide 39: Allowance for Credit Losses (ACL) by Loan Category
Allowance for Credit Losses (ACL) by Loan Category as of September 30, 2022 $ millions Loan Balance ACL $ ACL % Single Family - Mortgage and Warehouse $4,009.8 $18.0 0.45% Multifamily & Commercial Mortgage 2,965.0 14.6 0.49% Commercial Real Estate 5,523.9 73.8 1.34% Loans Commercial & Industrial Non
Slide 40: Contact Information
Contact Information Greg Garrabrants, President and CEO Derrick Walsh, EVP and CFO Andy Micheletti, EVP of Finance investors@axosfinancial.com www.axosfinancial.com Johnny Lai, SVP Corporate Development and Investor Relations Phone: 858.649.2218 Mobile: 858.245.1442 jlai@axosfinancial.com 40