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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported):  August 13, 2019

399177630_axosfinancialcolorpnga28.jpg

Axos Financial, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
001-37709
33-0867444
(State or other jurisdiction of
incorporation)
(Commission File Number)
(IRS Employer Identification
Number)
 
4350 La Jolla Village Drive, Suite 140, San Diego, CA
92122
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code: (858) 350-6200          
 
Not Applicable

(Former name or former address, if changed since last report.)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o                                    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o                                    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o                                    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o                                    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

o                                    Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o





Item 7.01     Regulation FD Disclosure.

Axos Financial, Inc. (the “Registrant”), parent of Axos Bank, will use the presentation provided in the Exhibits at conferences and one-on-one meetings in a non-deal roadshow beginning on August 13, 2019 and during the next few weeks.


This Form 8-K and the information attached below shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), nor shall it be incorporated by reference into a filing under the Securities Act of 1933, as amended (“Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such a filing. The furnishing of the information in this report is not intended to, and does not, constitute a determination or admission by the Registrant that the information in this report is material or complete, or that investors should consider this information before making an investment decision with respect to any security of the Registrant or any of its affiliates. The information in the materials is presented as of August 13, 2019, and the Registrant does not assume any obligation to update such information in the future.

Safe Harbor Statement
Statements contained in the slide show presentation that state expectations or predictions about the future are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act and the Exchange Act. The Registrant’s actual results could differ materially from those projected in such forward-looking statements. Factors that could affect those results include “Risk Factors” and the other factors appearing in the documents that the Registrant has filed with the Securities and Exchange Commission.


Item 9.01     Financial Statements and Exhibits

(d) Exhibits

99.1 Axos Financial, Inc. Presentation
99.2 Axos Financial, Inc. Presentation PDF





SIGNATURE

 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
Axos Financial, Inc.
 
 
 
Date:
August 13, 2019
By:
/s/ Andrew J. Micheletti
 
 
 
 
Andrew J. Micheletti
 
 
 
EVP and Chief Financial Officer



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Section 2: EX-99.1 (EXHIBIT 99.1)

axospres082019
Axos Financial, Inc. Investor Presentation August 2019 NYSE: AX


 
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-looking statements within the meaning of the Reform Act. These statements may include, but are not limited to, projections of revenues, income or loss, projected consummation of pending acquisitions, estimates of capital expenditures, plans for future operations, products or services, and financing needs or plans, as well as assumptions relating to these matters. Such statements involve risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. For a discussion of these factors, we refer you to the Company's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended June 30, 2018. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or by any other person or entity that the objectives and plans of the Company will be achieved. For all forward-looking statements, the Company claims the protection of the safe-harbor for forward-looking statements contained in the Reform Act. 1


 
Our Business Model is More Profitable Because Our Costs are Lower Banks Greater Than Axos1 $10bn2 As % of average assets (%) (%) Net interest income 5.17 3.02 Salaries and benefits 0.97 1.20 Premises and equipment 0.22 0.24 Other non-interest expense 0.87 1.05 Total non-interest expense 2.06 2.49 Core business margin 3.11 0.53 1. For the three months ended 3/31/19 – the most recent data on FDIC website “Statistics on Depository Institutions Report” Axos Bank only, excludes Axos Financial, Inc. to compare to FDIC data. Data retrieved 08/13/2019. 2. All Commercial Banks by asset size. FDIC reported for three months ended 3/31/19. Total of 141 institutions >$10 billion. Data retrieved 08/13/2019. 2


 
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 Partners sales center) • Securitization • Data mining/target • Outbound call feeding direct center sales marketing • Minimal outside • Cross-sell sales • Significant inside sales Core Digital Capabilities Integrated Digitally Data Driven Digital Next-Gen Customer Enabled Insight Marketing Technology Experience Operations 3


 
Fiscal 2019 Highlights Compared with Fiscal 2018 Asset Growth Deposit Growth $ Millions $ Millions 15,000 10,000 12.5% 8,983 17.6% 11,220 7,985 9,540 10,000 5,000 5,000 0 0 FY 2018 FY 2019 FY 2018 FY 2019 Net Income Diluted EPS $ Millions $ Diluted EPS 15.1% * 12.2% 2.39* 2.75 172.0* 3.00 200 153.3* 2.50 2.37 2.48 152.4 155.1 2.00 100 1.50 1.00 0.50 0 0.00 FY 2018 FY 2019 FY 2018 FY 2019 Return on Equity = 17.08%* Return on Assets = 1.68%* * Adjusted earnings and adjusted earnings per diluted common share, non-GAAP measures, which excludes non-cash amortization expenses and non- recurring costs related to mergers and acquisitions, and other non-recurring costs. Without adjusted earnings, ROE was 15.40% and ROA was 1.51% 4 based on GAAP earnings.


 
Fiscal 2019 Fourth Quarter Highlights Compared with Fiscal 2018 Fourth Quarter Asset Growth Deposit Growth $ Millions $ Millions 15,000 10,000 12.5% 8,983 17.6% 7,985 9,540 11,220 10,000 5,000 5,000 0 0 Q4 2018 Q4 2019 Q4 2018 Q4 2019 Net Income Diluted EPS $ Millions $ Diluted EPS 60 1.00 11.2% 42.2* $0.68* 37.9* 15.3% 40.6 0.80 $0.59* 37.1 $0.66  40 0.60 $0.58 20 0.40 0.20 0 0.00 Q4 2018 Q4 2019 Q4 2018 Q4 2019 Return on Equity = 16.07%* Return on Assets = 1.55%* * Adjusted earnings and adjusted earnings per diluted common share, non-GAAP measures, which excludes non-cash amortization expenses and non- recurring costs related to mergers and acquisitions, and other non-recurring costs. Without adjusted earnings, ROE was 15.49% and ROA was 1.49% 5 based on GAAP earnings.


 
Diluted EPS and Return on Equity Have Been Consistently Strong Despite Significant Increase in Tier 1 Capital Ratios Diluted EPS (FY) Return On Average Equity (FY) $ per share % 3.0 20 19.43 2.75** 18.34 17.78 17.89 17.08** 2.48 17.05 2.5 21% CAGR 2.37 15.40 2.10 15 2.0 1.87 10 1.5 1.34 1.0 0.96 5 0.5 0.0 0 2014 20152016 2017 2018 2019 2014 20152016 2017 2018 2019 Book Tier 1 8.7% 9.6% 9.1% 10% 9.4% 8.75% value $6.33 $8.51 $10.73 $13.05 $15.24 $17.47 leverage per ratio* share *Tier 1 leverage ratio is for Axos Financial, Inc., except 2014 which is for Axos Bank **Adjusted earnings and adjusted earnings per diluted common share, non-GAAP measures, which excludes non-cash amortization expenses and non-recurring costs related to mergers and acquisitions, and other non-recurring costs. Without adjusted earnings, Diluted EPS was $2.48 ROE was 15.40% based on GAAP earnings. 6


 
Net Interest Margin Has Been Stable/Rising Through a Variety of Interest Rate Cycles Stable Net Interest Margin 4.50% 4.11% 4.07% 4.00% 3.92% 3.91% 3.95% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% FY2015 FY2016 FY2017 FY2018 FY2019 Axos NIM - reported Fed Funds 7


 
Axos is a Top Quartile Performer Versus Bank Peer Group Axos Bank Peer Group Percentile ROAA 1.74% 1.03% 87% Return on equity 20.15% 9.24% 91% G&A 1.92% 2.61% 25% Efficiency ratio 38.52% 65.21% 11% The 91% on ROE means that the Bank outperformed 91% of all banks. The 25% G&A ranking means that only 25% of banks spend less on G&A than Axos. Peer group includes savings banks greater than $1 billion. Source: Uniform Bank Performance Report (UBPR) as of 6/30/19; data retrieved 8/12/2019. 8 Note: Peer group is all savings banks with assets greater than $1 billion for quarter ended 6/30/2019.


 
Diverse Lending Business Gain-on-sale Mortgage Banking Single family Jumbo Mortgage Warehouse Lending Multifamily Commercial Real Estate Small Balance Commercial Lender Finance Asset Backed Lending Equipment Leasing Lending C&I Lending Factoring Bank Loans Large Balance Commercial/Specialty Real Estate Small business H&R Block Franchise Lending Margin Lending Securities Securities-Based Line of Credit Auto Consumer Overdraft Lines Unsecured Lending 9


 
Loan Diversity – June 30, 2019 Loan Portfolio1 100% = $9,449 Million Factoring 1% Multifamily 21% CRE/Home Equity/ Consumer and Other 48% SF-Residential 6% C&I – SF Lender Finance C&I 6% 18% 1. Gross loans and leases before unaccreted discounts and loan and lease fees and allowances. 10


 
Our Asset Growth has been Driven by Strong and Profitable Organic Loan Production Net Loan Portfolio – End of Last Five Quarters ($ in Thousands)  $10,000,000 $9,017,550  $9,098,453  $9,382,124  $8,432,289  $8,654,500   $8,000,000  $6,000,000  $4,000,000  $2,000,000  $‐ Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Average Multifamily 53% 53% 53% 53% 53% Loan to Value Single family 57% 57% 57% 57% 57% 11


 
Loan Pipeline Remains Strong FY 2019 Q4 $ Millions 1,400 $1,297 $1,192 1,200 $105 $150 1,000 800 $444 600 $152 400 $446 200 0 Jumbo Agency Commercial Multifamily / Primary Single Family Total Single Single & Industral Small Balance Pipeline Warehouse Family Family Lending Commercial 12


 
Loan Origination Growth Fiscal Year Loan Originations Future Plans $ Billions › Organic growth in existing 8.4 business lines 8 7.5 1.5 • Multifamily geographic 7 21.6% expansion 1.6 5-yr CAGR 6 5.6 • Agency and jumbo 5.0 mortgage channel 5 1.4 4.3 expansion 1.4 4 1.0 • Small Balance 3.0 6.9 Commercial Real Estate 3 5.9 1.1 expansion 2 4.2 3.3 3.6 • Large Balance 1 2.3 Commercial / Specialty Real Estate expansion 0 › Additional C&I 2014 2015 2016 2017 2018 2019 verticals/product expansion › Retail auto lending launch Annual growth 42.2% 15.6% 11.2% 34.7% 12.3% › Consumer unsecured rate installment lending launch Loans for sale Loans for investment 13


 
Diversified Online Deposit Businesses Key Elements Consumer ‹ Demographically targeted brands direct internet ‹ Differentiated products with turn-down brands product options ‹ Exclusive relationships with significant Distribution brands, groups, or employees Partners ‹ Exclusive relationships with financial planners through Axos Advisor Small business ‹ Business banking with simple suite of banking cash management services Commercial/ Deposit Treasury ‹ Full service treasury/cash management Management Axos ‹ Broker-dealer client cash Securities ‹ Broker-dealer reserve accounts ‹ Fiduciary services for trustees Specialty ‹ 1031 exchange firms deposits ‹ Title and escrow companies ‹ HOA and property management BIN ‹ Prepaid program managers with focus sponsorship on large national programs 14


 
Deposit Growth in Checking, Business, and Savings Was Achieved While Transforming the Mix of Deposits June 30, 2013 June 30, 2019 100% of Deposits = $2.1 billion 100% of Deposits = $9.0 billion Checking and other demand Savings – IRA deposits Time deposits 3% 19% 26% Checking and other demand deposits Time 46% 50% deposits 31% Savings Savings 25% Checking Growth (6/2013 - 6/2019) = 956% Savings Growth (6/2013 - 6/2019) = 246% 15


 
Axos 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 16


 
Axos Customers are Highly Engaged Customer Engagement Results Engagement Low Activity High Activity Attributes Low Activity User Basic User Engaged Elite Engaged Engagement Score 0s 0 < S < 30 30 ≤ S < 60 ≥ 60 (0-100) Average Lifetime $100 $4000 $6,000 $50,000 Balance Average # of -< 5710 Services Used Average # of POS -< 11025 %of Total 22% 15% 41% 23% Population % of Total Balance 0% 6% 24% 70% Retention Moderate Moderate High High 64% of Population or 94% of Balance are Overall High Engagement Note: Study conducted on Rewards Checking customers. 17


 
Core Deposit Growth Was Sufficiently Strong To Grow Overall Deposits While Changing The Deposit Mix Deposit Growth Future Plans $ Millions › Enhanced digital marketing 8,983 9,000 automation integrated to outbound 24.2% 7,985 sales group 8,000 5-yr CAGR 6,900 7,000 › Products and technology 6,044 6,000 integration targeted to specific industry groups 5,000 4,452 4,000 › Create differentiated consumer and 3,042 business banking platform 3,000 2,000 › Enhanced focus on customer 1,000 service and user experience 0 › Leverage existing and create new 2014 2015 2016 2017 2018 2019 distribution partnerships to reduce % CDs1 26% 18% 17% 12% 25% 26% acquisition cost and leverage external brands % Borrowings2 24% 15% 12% 9% 6% 6% 1 as a % of total deposits 2 as a % of total liabilities 18


 
Diversified Fee / Non-Interest Income % Fee Income % Fee Income FY 2019* FY 2018* Agency Mortgage Banking Jumbo 6% 19% Multifamily Structured Settlement Gain on Sale – Other 7% 8% Other Cash/Treasury Management Fee Income Consumer Deposit Deposit/ Service 66% 67% Fees Prepaid Tax Payments 7% 6% Prepayment Fee Broker-Dealer 14% 0% *Excludes securities income. 19


 
Over the Last Seven Years, Axos Has Successfully Started New Products, Added Distribution Channels, and Completed Acquisitions 2013 2014 2015 2016 2017 2018 2019 New product • Treasury/ • Small • Auto • HRB • Retail Auto • Factoring cash balance franchising • Refund Advance • Universal manage- CRE lending (H&R Block) Digital Bank ment • Unsecured • C&I Consumer • Prepaid Lending • Agency Servicing retention Distribution/ • UFB Direct • Virtus • Wholesale • H&R Block retail • Homebuilder • Wholesale channel • Bank X agency stores mortgage mortgage • IRA group express • Nationwide partnership M&A • Principal • Union • H&R Block • Equipment • Epiq Trustee • COR Clearing Bank Federal Bank leasing Services • WiseBanyan • Nationwide • MWABank deposits deposits 20


 
Key Goals of Universal Digital Bank › Increase chance 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 such as deposits, loans, and mortgages Self-Service › Products optimized by channel, recipient and journey › Self service saves time and cost (e.g., activate and de-activate debit-card in platform, send wires via self-service) › Easy integration of third-party features (e.g., biometrics) Facilitate › Access to value added tools (e.g., robo-advisory, automated savings Partnerships features) either proprietary or third party › Enable creative customer acquisition partners › Provide holistic and interactive and intuitive design experience Customizable › Integrate online experience with other channels Experience › Artificial intelligence and big data credit models enable quick Cross-Sell credit decisions › Customized product recommendations based upon analytical determination of need 21


 
Universal Digital Bank Consumer Platform Product Development Cross-sell (In-House Apps) • Trusts • Auto • IRA Consumer Online • Mortgage • Personal loan Banking Platform • Robo-advisor App Store Personalization Management & Segmentation • Third party • Real-time retention services/payments • Next-best action • Third-party lending • Transaction mining • Personalized alerts 22


 
Advanced Data Analytics Provides Key Insights Into Customer Engagement, Profitability, and Retention to Enhance Customer Lifetime Throughout the Bank Framework for Data Analysis Key Learnings Retention & Attrition Drivers to Boost Long-Term Customer Engagement Customer Segmentation Methodology to Understand Usage & Behavior Profitability Analysis at the Individual Customer Level Streamlined Acquisition Process via Lookalike Modeling & Sales Efficiencies 23


 
Our Strategic Partnership with H&R Block H&R Block Overview Products for 2019 Tax Season › Approximately 10,000 U.S › Refund Transfer branches › Emerald Advance Unsecured Loan › Files 1 in every 7 U.S. tax returns › Emerald Prepaid Card › 19.7 million U.S. tax returns per › Refund Advance Interest-Free Loan year • Axos was exclusive provider › 83% of customers receive a refund for 2019 tax season › 35% franchise-owned • Axos provides credit › Approximately 2,400 employees underwriting, loan origination, › 55 million visits per year on HRB funding and loan servicing website • Interest-free loan is repaid › Social media using borrower’s tax refund proceeds • 28,600 Twitter followers • Axos’ profits will depend on • 463,000 Facebook fans origination volume and actual • 1.7 million views on YouTube credit losses 24


 
Omni Channel Approach for Axos’ 2019 Digital Marketing Strategy User Experience Infrastructure Organizational Marketing automation commitment to user implementation experience Personalization & Data Paid, Social & Mobile strategy Digital personas for personalized Social employee interactions engagement DIGITAL STRATEGY Brand & Content Analytical strategy Enhanced branding, Multi-dimensional analysis messaging and by geography, customer positioning type, product, media, traffic source Business Process Introduced BI reporting tool for analytics 25


 
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 Special Loan Life Set Appetite Originations Reporting Cycle Management Assets Establish Monitor Data-Driven Mitigate Credit Assets Axos Credit Safe Growth Decision Problem Framework Throughout Objectives Making Loans and Culture Life Cycle Example of • Board of Credit Tools Directors • Annual Strategic Plan • Corporate Governance • Policies & Approval Authorities 26 Credit Tools list is a sampling and is not purported to be comprehensive.


 
Monitoring & Management Oversight: Core Products Single Family Residential Income Property Lending › Portfolio level monitoring with individual loan › Risk based annual loan review process, with reviews completed on an exception basis 4 levels depending on financial performance (e.g., delinquency, FICO/LTV degradation). & risk triggers › FICO pulled twice a year › Updated financials at least annually › Updated AVMs twice a year › FICO pulled twice a year › Super jumbo loans receive complete annual › Updated AVMs twice a year loan review, including updated credit report › Updated credit report and property › Pledged assets receive refreshed CLTV ratios inspections requested based on risk triggers on a semiannual basis › Classified loans receive quarterly review › Portfolio-level review performed quarterly › Portfolio-level review performed quarterly › Stress testing performed twice a year Commercial Specialty C&I – Lender Finance › Loan reviews at least quarterly › Loan reviews at least quarterly › Project updates at least quarterly › Updated financials at least quarterly › Updated financials at least annually › Borrowing base / custodial reports at least › Site visits & inspections for development monthly projects › Continuous collateral analytics, with quarterly validation Note: Lists are a sampling and are not purported to be comprehensive. 27


 
Best-in-Class Loan Quality Total Net Charge-Offs Loans in non-accrual to Annualized1 total loans1 (%) (%) 1.50 0.59 1.04 0.50 1.00 0.48 0.50 0.04 0.00 0.00 Axos Banks > $10bn Axos Banks >$10bn 1. From FDIC SDI report at 3/31/2019. Total of 141 institutions included in the >$10 billion group. Data retrieved 08/13/2019. 28


 
Investment Summary Full service online banking platform with structural cost advantages vs. traditional banks Superior growth and ROE relative to large and small competitors Solid track record of allocating capital to businesses with best risk-adjusted returns New business initiatives will generate incremental growth in customers, loans and profits Robust risk management systems and culture has resulted in lower credit, counterparty and regulatory risks 29


 
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 30


 
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Section 3: EX-99.2 (EXHIBIT 99.2)

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