Axos Financial, Inc. · NYSE:AX
Axos Financial — Investor Presentation (May 2022)
40 slides from Axos Financial's investor presentation, May 4, 2022
Slide 1: Axos Financial, Inc. Investor Presentation
Axos Financial, Inc. Investor Presentation May 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 and Our Assets are Higher-Yielding
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 4.30% 2.21% Salaries and benefits 0.82% 1.18% Premises, equipment and 1.00% 1.02% other non-interest expense To
Slide 5: Axos Financial's Three Business Segments Provide the Foundation for Sustained Long-term Growth
Axos Financial’s Three Business Segments 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 f
Slide 6: Fiscal 2022 Third Quarter Highlights Compared with Fiscal 2021 Third Quarter
Fiscal 2022 Third Quarter Highlights Compared with Fiscal 2021 Third Quarter Asset Growth Deposit Growth $ Millions $ Millions 15,000 12,733 20,000 16,081 11,613 9.6% 14,827 8.5% 15,000 10,000 10,000 5,000 5,000 0 0 Q3 2021 Q3 2022 Q3 2021 Q3 2022 Diluted EPS Net Income $ Millions $ Diluted EPS 100
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 4.04 30.00 26.58 4.00 14.4% CAGR 23.62 14.9% CAGR 3.56 25.00 3.50 20.56 2.98 3.00 20.00 17.47 1.88 2.48 15.24 2.50 1.74 15.00 13.05 2.00 1.58 10.73 1.50 10.00 1.
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, without HRB 4.11% 3.90% 3.84% 3.83% 3.92% 3.76% 2.40% 1.91% 0.08% 0.08% 1.60% 0.33% 2017 2018 2019 2020 2021 Q3 2022* NIM (Excluding HRB) Effective Fed Funds rate * Company uses a June 30
Slide 9: Loan Portfolio More Sensitive to Rate Increases Today Compared to Last Fed Fund Rate Hike
Loan Portfolio More Sensitive to Rate Increases Today Compared to Last Fed Fund Rate Hike Starting in 2015 September 30, 2015 March 31, 2022 Variable rate Fixed Fixed 9% – 12% Variable 9% Rate 8% Fixed Rate 12% Variable rate 52% 39% Hybrid 80% Hybrid 80% Hybrid 9
Slide 10: Interest Rate Components of Loan and Lease Portfolio
Interest Rate Components of Loan and Lease Portfolio At March 31, 2022 Mix of Loan Repricing Types Fixed/Hybrid Years to Maturity / Repricing* $M 7,000 6,408 Fixed 6,321 6,336 5,856 9% 6,000 5,000 4,178 4,000 Variable 2,700 Hybrid 3,000 52% 39% 2,000 1,338 691 1,000 - Years 1/2 1 2 3 5 10 20 >20 11%
Slide 11: Axos Clearing Net Interest Margin is Highly Rate Sensitive with De minimis Impact to Capital
Axos Clearing Net Interest Margin is Highly Rate Sensitive with De minimis Securities Net Impact to Capital Annualized* Sensitivity Revs/Costs to rate Capital Impact $ Thousands Rate 0.35% 15c-3 +$942 100% 0% Volume $270,418 Rate 3.54% Margin Lending +$11,467 75%-100% 0%-10% Volume $323,922 Clearing
Slide 12: Optionality with Deposits from Axos Securities
Optionality with Deposits from Axos Securities Securities segment provides approximately $2.8 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 › Currentl
Slide 13: Axos is a Top Quartile Performer Versus Bank Peer Group
Axos is a Top Quartile Performer Versus Bank Peer Group Axos Bank Peer Group Percentile ROAA 1.84% 0.72% 94% Return on equity 18.06% 6.87% 94% G&A 1.78% 2.39% 18% Efficiency ratio 39.12% 69.04% 5% The 94% on ROE means that the Bank outperformed 94% of all banks. The 18% G&A ranking means that only 1
Slide 14: Net Loan Growth by Category for Third Quarter Ended March 31, 2022
Net Loan Growth by Category for Third Quarter Ended March 31, 2022 $ Millions Q3 FY22 Q2 FY22 Inc (Dec) Single Family Jumbo Mortgage $3,549 $3,686 (137) Mortgage & Warehouse SF Warehouse Lending 423 596 (173) Multifamily & Multifamily 2,080 2,017 63 Commercial Mortgage Small Balance 467 583 116 Comm
Slide 15: Prudent Loan Growth With Low LTVs
Prudent Loan Growth With Low LTVs Net Loans – Last Five Quarters ($ in Millions) $14,000 $13,094 $12,607 $11,610 $11,711 $11,879 $12,000 $11,415 Loan Growth Drivers $10,000 • Product Expansion $8,000 • Repeating Client Relationships $6,000 • Reputation for Reliable $4,000 Execution $2,000 $- Q2 2021
Slide 16: Strong Loan Origination Growth
Strong Loan Origination Growth Expect Mid-Teens Loan Growth in FY 2023 Fiscal Year Loan Originations Future Plans $ Billions › Organic growth in existing 10 12.2% 5-yr CAGR business lines 8.9 9 8.4 8.4 • Multifamily geographic 8 7.5 1.6 expansion 1.5 1.6 7 • Agency and jumbo 1.6 mortgage channel 5.6
Slide 17: Diversified Deposit Gathering
Diversified Deposit Gathering ‹ Serves 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 $1.2 B $4.4 B ‹
Slide 18: Deposit Growth in Checking, Business, and Savings Was Achieved While Transforming the Mix of Deposits
Deposit Growth in Checking, Business, and Savings Was Achieved While Transforming the Mix of Deposits June 30, 2013 March 31, 2022 100% of Deposits = $2.1 billion 100% of Deposits = $12.7 billion Checking and Savings – IRA other demand Time deposits deposits 2% 8% 19% Checking and other demand 24% d
Slide 19: Customer Base and Deposit Volume is Well Distributed Throughout the United States
Customer Base and Deposit Volume is Well Distributed Throughout the United States Average Deposit Balance Number of Accounts Axos Deposits Have National Reach With Customers in Every State 19
Slide 20: Commercial Loans and Deposits
Commercial Loans and Deposits Spot Balance ($B’s) $10.0 $9.0 $8.0 $8.74 $7.0 27.84% CAGR $6.0 $6.30 $5.0 $4.0 $4.45 $3.0 30.92% $3.01 CAGR $2.0 $1.0 $0.0 Jun-19 Mar-22 Loans Deposits Loan Growth Drivers Deposit Growth Drivers • Product Expansion • Unique value proposition • Repeating Client Relation
Slide 21: Fee Income Growth and Diversification
Fee Income Growth and Diversification Year Ended Nine Months Ended June 30, 2019 March 31, 2022 100% of Non-Interest Income = 100% of Non-Interest Income = $82.9 million $115.0 million* Prepayment Penalty Prepayment Banking and Penalty 7% Gain on Sale Services Fee 11% 11% 8% Mortgage 26% 6% Banking
Slide 22: Axos Securities Overview
Axos Securities Overview Monetizing synergies by integrating Banking products and services to Securities customers, RIAs, and IBDs Consumer Banking Axos Clearing 69 IBDs Consumer Deposit Accounts Securities Clearing & 200 RIAs 265,000 Clients ODL/Margin Accounts Custody Jumbo Single Family Mortgage
Slide 23: Integrated Securities and Banking
Integrated Securities and Banking Leveraging Bank’s existing digital platforms allows for a unique integrated and flexible Banking and Securities product features Rich Banking, Onboard Clients Unified Service “Single-Pane” Securities, and Faster Model Crypto Features Salesforce Universal Universal S
Slide 24: Axos Clearing Overview
Axos Clearing Overview Trailing Twelve Months (TTM) ending March 31, 2022 ($M) Leadership team with more than 100 years combined 1% Interest Income Sweep Interest industry experience 6% More than 240 employees Margin Lending across Clearing and 20% Custody 52% Clearing Fees Nation’s 8th larges
Slide 25: 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 Investment Managers • Automation frees up > time/resources for client interactions • Axos to provide bundled securities clearing, Advisors are Lea
Slide 26: Axos Advisor Services (AAS) At A Glance
Axos Advisor Services (AAS) At A Glance Liberty Provides a Comprehensive Turnkey Platform Performance Unified Serving 200 RIAs1 Reporting Managed ($1M+ AUC) Accounts Easy Fee Billing Rebalancing ~$25B Assets Under Custody2 Tax Automatic Management Reconciliatio n Tools TAMPs Traditional Small RIAs R
Slide 27: 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 $6.9M $2.4M Revenue Revenue $5.2M $1.8M $3.5M $3.5M $1.2M $2.7M $0.6M $1.7M $1.8M $0.9M $250M $5
Slide 28: 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 29: 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 30: Business Segment Overview – Axos Invest
Business Segment Overview – Axos Invest Free financial digital advisor that helps clients achieve their goals by Core automating the financial planning process. Services Provides premium packages for clients who want additional value beyond our core services. High Conversion Rates – Platform h
Slide 31: Axos Invest Managed Portfolios Industry Comparison
Axos Invest Managed Portfolios Industry Comparison 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 free
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 Vision and Approach
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 0.12 0.10 0.08 0.07 0.06 0.06 0.05 0.02 0.01 0.00 -0.05 FY17 FY18 FY19 FY20 FY21 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 Liability (UCL)
Change in Allowance for Credit Losses (ACL) & Unfunded Loan Commitments Liability (UCL) ($ in millions) 155 1.0 (1.9) 150 0.3 4.5 9.7 145 8.7 140 135 143.4 130 140.5 125 120 Dec 31, 2021 Gross Gross Provisions for March 31, 2022 ACL + UCL Charge-offs Recoveries credit losses ACL + UCL ACL UCL 38
Slide 39: Allowance for Credit Losses (ACL) by Loan Category as of March 31, 2022
Allowance for Credit Losses (ACL) by Loan Category as of March 31, 2022 $ Millions Loan Balance ACL $ ACL % Single Family - Mortgage and Warehouse $3,972.1 $21.8 0.55% Multifamily & Commercial 2,662.5 13.8 0.52% Mortgage Commercial Real Estate 4,293.0 69.8 1.63% Loans Commercial & Industrial Non-RE
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