Axos Financial, Inc.

and welcome to the Access Financial third quarter 2020 earnings results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Johnny Lai, Vice President of Corporate Development and Investor Relations. Please go ahead, sir.

Thank you, and good afternoon, everyone. Thanks for joining us for Axos Financial Inc.' 's third quarter financial results conference call. With me today are the company's president and chief executive officer, Greg Garabrantz, and executive vice president and chief financial officer, Andy Micheletti. Greg and Andy will review and comment on our financial and operational results for the third quarter, and they will be available to answer questions after the prepared remarks. Before we begin, I would like to remind listeners that prepared remarks made on this call may contain forward-looking statements that are subject to risks and uncertainties, and that management may make additional statements in response to your questions. Therefore, the company claims the protection from the safe harbor for forward-looking statements that's contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements related to the business of Axos Financial Inc. and its subsidiaries can be identified by a common-use forward-looking terminology and those statements involve unknown risks and uncertainties, including all business-related risks that are more detailed in the company's filings on Form 10-K, 10-Q, and 8-K with the SEC. This call is being webcast, and there will be an audio replay available for 30 days in the Investor Relations section of the company's website located at www.axosfinancial.com. All the details... of this call were provided on the conference call announcement and in the press release today. At this time, I'd like to turn the call over to Greg, who will provide opening remarks.

Thank you, Johnny. Good afternoon, everyone, and thank you for joining us. I'd like to welcome everyone to Axos Financial's conference call for the third quarter of fiscal 2020, ended March 31, 2020. I thank you for your interest in Axos Financial and Axos Bank. We had an excellent quarter with annualized double-digit loan growth, stable net interest margins, strong fee income, and very low credit losses. Rather than go through the typical rundown of the quarter, I will focus my discussion on three topics, credit, capital, and near-term business outlook. We have a consistent track record of maintaining low credit losses through multiple economic cycles given our conservative underwriting guidelines, senior structures in our commercial lines and loans, and the collateralized nature of our loan book. During the great financial crisis, our peak annual net charge-offs for loans we originated was less than one basis point for single-family and multi-family mortgages. The vast majority of our credit losses incurred between 2008 and 2012 were for recreational vehicle loans that were discontinued in 2007. We are confident that we will be able to weather the current economic downturn for several reasons. The vast majority of our loan portfolio is collateralized by hard assets at conservative attachment points. Our single-family mortgage, multifamily, and commercial real estate mortgages have low loan-to-values, low loan-to-costs, and are located in markets with historically strong demand. The vast majority of our larger real estate exposures are structurally protected by relationships with large funds that are structurally subordinated to us. Our direct exposure to unsecured consumer loans represents approximately 50 basis points of our loan portfolio. We have no exposure to credit cards and approximately $3 million of home equity lines. Although some of our asset-backed facilities and a real estate loan or two are technically classified as shared national credits because of the nature of the syndication in which we are a part, we do not have exposure to cash flow-based shared national credits. We lend exclusively to prime and super prime borrowers across each of our consumer lending categories, auto, single-family mortgages, and personal and secured lending. We have minimal credit exposure to airlines, malls, casinos, retailers, theme parks, hotels, oil and gas, restaurants, and small businesses. We do not have mezzanine or subordinated tranches of securities in our portfolio. We do not have collateralized loans in our portfolio that are junior in rights to other loans other than the previously mentioned $3 million of home equity loans. If we take additional collateral in a second position, it is an abundance of caution and supported by a first lien on other collateral. Approximately 95% of our loans outstanding in March 31st, 2020 were collateralized by hard assets with a loan to value ratio in the 50s, including 9.1 billion of real estate assets and 787 million of primarily consumer receivables. Single family mortgages representing 40% of our total loan portfolio had a weighted average loan-to-value ratio of 57%. At the end of March 31st, 2020 quarter, 60% of our single-family mortgages have loan-to-value ratios at or below 60%. 33% have loan-to-value ratios between 61% and 70%. 6% have loan-to-value ratios between 71% and 80%. And less than two basis points, or 860,000 of combined balances, have greater than 80% loan-to-value. We have an established track record of strong credit performance in our jumbo single-family mortgage lending book with lifetime credit losses of originated single-family loans of less than three basis points of loans originated. While we do not foresee a sharp decline in home prices nationwide on par with levels we experienced in the 2007 and 2008 financial crisis, we believe that any potential losses in our single-family real estate secured loan book will be manageable even in a sharp economic and housing downturn given the desirability and low attachment points of our underlying collateral. Multifamily loans, representing 21% of our total loan portfolio at 3-31-2020, had an average loan-to-value ratio of 51%. The lifetime credit losses in our originated multifamily portfolio are less than one basis point of loans originated over the 18 years we have originated multifamily loans. At the end of March 31st, 2020 quarter, 44% of our multifamily mortgages have loan-to-value ratios at or below 55% loan-to-value. 35% have loan-to-value ratios between 56 and 65. 20% have loan-to-value ratios between 66 and 75, and less than 1% greater than 75 loan-to-value. The average debt service cover ratio of our multifamily loans was 150, was 1.5 at 3-31-2020. Our small-balance commercial real estate loan portfolio of $410 million, representing approximately 4% of our total loans at 331-2020, had a weighted average loan-to-value ratio of 52%. At the end of the March 2020 quarter, 49% of our small-balance commercial real estate loans have loan-to-value ratios that are below 50%. 23% have loan-to-value ratios between 51% and 60%. 23% have loan-to-value ratios between 61% and 70%. 4% have loan-to-value ratios between 71% and 75%, and around 1% between 76% and 80% loan-to-value. Those higher loan-to-value loans are uniquely positioned. One of the largest loans is secured by a state-level guarantee under a special program, and all loans at that level have strong personal guarantors. In our small-balance commercial real estate portfolio, we had approximately $80 million of loans to hotels and resorts, representing less than 1% of our total outstanding loans. We have an active dialogue with each of our CRE borrowers, and the weighted average loan-to-value of this book is approximately 52%, including 49% loan-to-value for the hotel exposures. The average debt service cover of our small balance commercial real estate loan book is 1.69 at 331-2020. Our mortgage warehouse loan book with March 31st balances of $380 million is secured by single-family mortgages that can be sold if the borrower is unable to turn the book. We temporarily suspended accepting non-agency mortgages other than those that we intend to fund as collateral for our mortgage warehouse facilities in mid-March due to dislocations in the secondary market for non-agency mortgages. As of April 28, 2020, We had approximately $88 million in outstanding non-agency exposure in our mortgage warehouse book, or 19% of total current balances of $462 million. Our initial advance rate on non-agency loans varied between 90% and 95% of the note amount, and we typically curtail an additional 15% on day 45. Our weighted average exposure on a loan-to-value basis on the $87 million in non-agency loan balance is outstanding, distributed among eight different warehouse clients was 58%. Our borrowers have been actively reducing their non-agency exposure, and we have ongoing discussions to sell their remaining non-agency loans and reduce their draw on our line. We do not currently project losses from any non-agency exposure on our warehouse lending book, particularly given that the current market execution of trades is higher than our adjusted and curtailed advance rate. Our warehouse clients are benefiting from elevated levels of refinancing activity and higher margins across the industry due to capacity constraints. Our commercial loan book, including lender finance and commercial specialty real estate, is comprised of loans and lines of credit secured by single-family, multifamily, commercial real estate, land, and consumer receivables. The lender finance book is comprised of real estate and non-real estate transactions. The weighted average advance rate on the real estate lender finance book is 27.2%, with no transaction with an advance rate greater than 50%. The non-real estate lender finance book, backed primarily by consumer loans, is approximately $732 million, with an average advance rate of 27% of the outstanding receivable balances. These structures generally require rapid paydowns in the event of any significant collateral deterioration in the receivables, and are also paid down rapidly in the event originations decline. We have sole and absolute discretion to approve or deny draws on all of our real estate secured lender finance and mortgage warehouse lines. The weighted average loan-to-cost on our commercial specialty real estate portfolio is 44%, with strong junior partners supporting the capital structure. We hold a senior position in all of our lender finance and commercial specialty real estate loans, and every deal has significant capital support from borrowers and or sponsors. We monitor the performance of the underlying collateral housed in a bankruptcy remote special purpose vehicle, allowing us to identify credit deterioration and take swift action to protect our principal and interest. In our commercial bridge and construction portfolios, we work with experienced developers and well-capitalized sponsors such as Aries, Fortress, Madison, and Blackstone. The projects are located in gateway cities such as Los Angeles, New York, San Diego, and Denver. The average loan size is approximately $18 million. The average remaining term is 14 months, and the average loan-to-cost is 44%. We have no direct credit exposure to airlines, casinos, theme parks, oil and gas exploration companies, retailers, or movie theaters. Our equipment leasing portfolio represents our entire exposure to the oil and gas, aircraft, and restaurant sector. In our equipment leasing portfolio, we had approximately $28 million of leases to four borrowers who provide services to the oil and gas and mining industries, a $13 million lease to the largest provider of emergency medical transportation services in the United States backed by a fleet of helicopters, and $5 million of leases to a large fast casual restaurant operator that finances countertop kiosks. The average debt service coverage ratio for the six equipment leases mentioned above was 2.87 times at the end of the third quarter. All of the above-mentioned credits were current as of March 31, 2020. Although some of our leases to companies have cash flow-based leverage on their balance sheet, we have no cash flow-based leverage loans. We had approximately $263 million of hotel and $97 million of retail next-use exposure in our commercial specialty real estate loan portfolio, representing 2.5%, and less than 1% of our total loans outstanding at March 31, 2020, respectively. The vast majority of hotel loans are AB notes that we hold a senior position in with a strong fund in a junior position. The only two direct hotel deals we have are one in Manhattan at a 55% loan-to-value at origination with 97% ownership by the son of a Saudi billionaire, and the other is also in the New York area for $12.5 million with a full guarantee from an individual with a net worth of over $50 million. The hotel properties are completed, and all hotels are current in their loan payments. The average loan-to-value of the hotel and retail commercial specialty real estate loans were 48%. Our non-real estate consumer lending is comprised of approximately $312 million of auto loans, $55 million of personal and secured loans, and $56 million of H&R Block refund advance loans. We source our auto loans primarily from dealers located in 10 states and lend to prime borrowers with an average FICO score of 772. We fully underwrite and service every auto loan we hold on our balance sheet, and the portfolio continues to perform in line with expectations. We have managed the credit risk of our personal unsecured loan book by focusing on prime borrowers with an average FICO score of 765 and an average loan size of $20,000. Given the rapid deterioration in the economy and the rise in unemployment nationwide, we have temporarily suspended originations of new personal unsecured loans. We originated approximately $1.36 billion of refunded advance loans this quarter, up 17% from the $1.16 billion in the three months ended March 31, 2019. We have received payments for all but $56 million of the principal balances for RAs as of March 31, 2020, a pacing that is far ahead of the disclosed pacing of others in the industry. Given the 90-day extension in the federal tax filing deadline by the IRS, we anticipate a more extended repayment timeframe for RAs this year compared to the prior year, and cannot guarantee this extended pace will result in no incremental credit losses. In our securities business, we ended the quarter with approximately $159 million of margin loans, down $67 million from December 31, 2019. Despite record price volatility in the stock market over the past few months, we successfully managed our margin lending business with no incurred losses. Our overall credit risk management approach is to engage in frequent communications with individual borrowers and lending partners and determine the optimal set of actions by each individual credit based on borrower, sponsor, project cash flow, and liquidity. Business unit leaders have been working with our chief credit officer and his underwriting and portfolio management teams to evaluate and monitor clients that have requested forbearance and or become delinquent in their loan payments. We have maintained an elevated cadence of communications with clients through email, phone, and other channels over the past several weeks, and the tenor of the conversations have been productive. Other than as directed by Fannie and Freddie, with respect to agency mortgages that we service and hold no other economic interest, we have not and will not make extended blanket loan forbearances or modifications on real estate loans, but will work with borrowers on a case-by-case basis on deferral requests while we help them manage through the negative impact from COVID-19. We believe this approach is more appropriate for our borrowers given the unique circumstance and uncertainty surrounding the near-to-immediate-term outlook on the economy and various government restrictions that have been implemented. For single- and multifamily real estate loans, we have not yet granted any deferrals or long-term modifications, but rather provided one- or two-month forbearances to allow us to have more time to review individual circumstances. With respect to borrowers who did not make their payment for April 1st, which would have been late on April 15th, meaning that they would be currently about two weeks late in the single-family, multifamily, and small-balance commercial real estate groups. And the number of those borrowers who have requested assistance that have greater than 65% loan-to-value ratios at origination represents 2.6% of the total single-family portfolio and 76 basis points of the combined multifamily and small-balance commercial real estate portfolios. Since many borrowers have been told by some banks that a simple phone call is enough to obtain relatively long-term deferrals, there are customers who are calling expecting to be granted long-term assistance for no legitimate reason. With respect to the auto lending side, deferral requests were granted for 8.7% of the portfolio, and the unsecured lending side, about 4.7% of the book, have requested deferrals. These are currently short-term deferrals with 90% no more than two months and around 10% receiving three-month deferrals. We are still developing how we will formulate our policies for each asset class in this regard, given that each asset class has its own dynamic. For example, given the level of protective equity, as well as the high default rate on our notes of 18% in our multifamily and small-balance real estate book, we believe our loans will be saleable quickly to opportunistic buyers if we have borrowers who simply wish to utilize loan deferrals as a temporary liquidity buffer rather than ensuring they prioritize their payment on their first mortgage. Provisions for loan losses were approximately $28.5 million in the quarter ended March 31, 2020, up $9.5 million compared to the same period a year ago. Excluding loan loss provisions for HR block-related loans in both periods, our loan loss provision was $10.8 million, or $8 million, or up $8 million from $2.8 million in the prior quarter. The $69.4 million of loan loss reserves XRAs for the quarter ended March 31, 2020 represented approximately 105.7% of total non-performing assets and 22.3 times our annualized net charge-offs. Approximately $4.2 million of the $10.8 million loan loss provision XRAs in the quarter ended March 31, 2020 was attributed to loan growth and $6.6 million was attributed to the rapid and sharp deterioration in the economy. Our provisions for the March quarter were not impacted by CECL because our CECL adoption will occur by June 1, 2020. Andy will provide more detail with respect to how we were thinking about the CECL impact in his prepared remarks. One of the benefits of the later implementation for CECL is that we will be able to incorporate more updated information in our projections. We are encouraged by the speed and size of various fiscal and monetary actions taken by the Federal Reserve, Treasury, and other government agencies, and believe that some of these actions will help mitigate the negative ramifications of COVID-19 on our borrowers. We participated in the SBA's Paycheck Protection Program, originating approximately 85 million of loans for 149 existing and new clients. Even though we were an approved SBA lender, we had not previously been an originator of SBA 7A loans, but our technology capabilities streamline a set of processes to quickly open deposit counts and underwrite and fund PPP loans. In addition to providing much-needed capital for a subset of our borrowers, participation in the PPP program also helped generate incremental relationships and deposits for our small business and commercial banking groups. Our credit quality remains good. Our annualized net charge off to average loans and leases was three basis points this quarter compared to four basis points in the corresponding period last year. Non-performing assets, the total asset ratio is 54 basis points for the quarter ended March 31, 2020, flat from December 31, 2019. The majority of our non-performing assets are comprised of single-family and multifamily loans with low loan devalues. We remain well-reserved with our allowance for loan loss representing 150.7% coverage of our non-performing loans and leases at March 31, 2020. We continue to generate strong returns. with a return on average common shareholders' equity of 18.65% and 15.34% in the three months and nine months ended March 31, 2020, respectively. Our efficiency ratio for the banking business segment was 33.2% for the quarter ended March 31, 2020, down over 200 basis points from 35.26% in the year ago. Our capital ratios remain strong at 8.72% at the bank and 8.55% at the holding company. Despite a higher provision for loan loss reserves and buying back approximately $39 million of common stock at an average price of $19.74 per share this quarter, our tangible common equity to total asset ratio remains healthy at 8.66% at March 31, 2020. Given that we believe there will be tighter credit standards coming out of these times, our top priority for capital will be to fund growth in our existing businesses. Although we had discussed in previous calls starting to pay a modest dividend, Given the uncertainty surrounding the economy, the global pandemic, and impact on various government actions on consumer and corporate behavior, we've decided not to pay a dividend until we get better clarity on the depth and duration of economic and business disruptions. We have a healthy liquidity position and a diverse set of funding. Our balance sheet deposits increased by 10.5% year over year, with checking and savings deposits increasing by 16.4%. Our commercial cash and treasury management, small business banking, and specialty deposits continue to show positive growth. Average non-interest-bearing deposits increased by almost $1 billion year-over-year, led by our Axos fiduciary services group. Client cash deposits from AFS and Axos Securities, currently held at other banks, was approximately $455 million at 331-2020. We have the ability to bring back a good portion of our off-balance sheet deposits if it's economically advantageous to do so. We also have access to $3.8 billion of FHLB borrowing, $3 billion in excess of the $771 million we had outstanding at the end of the third quarter. Furthermore, we have $1.4 billion of liquidity available at the Federal Reserve discount window as of March 31, 2020. With many banks and fintechs reducing rates on their consumer online savings and money market deposit products, we have more flexibility to raise consumer online deposits at relatively lower all-in costs compared to three and six months ago. We have a relatively stable outlook with respect to loan growth and net interest margin. In jumbo single-family mortgages, many banks and non-banks have pulled back on the aggressive lending terms and conditions they offered in the prior 12 to 18 months. Pricing on new jumbo mortgages has tightened due to dislocation in the secondary market for non-agency mortgages and liquidity constraints for most non-bank lenders. The purchase market is weakened due to the government's stay-at-home and forbearance measures. We have tightened our credit underwriting standards with respect to all of our lending products. We continue to see demand for our lending products at our tightened credit standards. The multifamily and small balance CRE dynamics vary by geographic market and property type. Rent payments in our primary markets where we lend held up relatively well in March and April. The stimulus checks, forbearance programs, federal subsidies on unemployment insurance, and the SBA Paycheck Protection Program should provide short-term cash flow for renters and borrowers who are unable to work voluntarily or involuntarily. Supply constraints on housing and relatively diverse nature of local economies on the West Coast make multifamily and commercial real estate markets attractive in the medium to long term. How quickly economies are able to resume normal levels of production and productivity will dictate the short-term dynamics in these two loan categories. We do not know whether governmental intervention in rent collection, eviction, foreclosure processes will impact our willingness to continue to lend or impact our ability to manage our loan book. In our two largest CNI lending categories, lender finance and commercial specialty real estate, we continue to evaluate new opportunities but are pivoting to leverage real estate assets at even more conservative advance rates than previous. Given the current environment, we will be able to deploy capital senior to our funding partners where we can obtain better economics on loans and obtaining higher margins of safety and better structures. With respect to auto and personal unsecured lending, we have temporarily suspended originations for all the prime borrowers with a minimum FICO of 720 and significantly tightened credit standards until we have more information about when employees will be allowed to go back to work and what restrictions on commerce and travel may remain in place before we look to grow either of these consumer lending portfolios. We're actively originating and funding PPP loans for existing and new Axos customers. These forgivable loans, which are 100% guaranteed by the SBA and carry a 0% risk weighting, will remain on our books until we sell them back to the SBA or utilize the Federal Reserve's funding facility. Through April 27th, we have originated and funded approximately $85 million of PPP loans and have a backlog of $38 million in various stages of processing. We will receive a one-time processing fee between 1% or 5% of the principal amount of PPP loans we originated based on the size of each loan. We are delighted to be able to help small businesses nationwide stay open and pay their employees during these challenging times. We continue to maintain stable net interest margins despite significant flattening of the yield curve and the shift in competitive dynamics across various lending and deposit categories. Excluding the impact from H&R Block-related loans and deposits, our net interest margin for the banking business was 3.85% compared to 3.87% in the prior quarter and 3.9% in the third quarter of 2019. On the asset side, approximately 61% of our loans are 5-1 arms with single-family and multifamily mortgages as the underlying collateral. With a slowdown in prepay activity and stability in new jumbo mortgage and multifamily loan yields, we expect to maintain overall yields in our jumbo single-family mortgage loan book and our multifamily loan book. The majority of our small-balance commercial real estate portfolio, which represents another 4% of our loan balances at 331-2020, are term loans with fixed interest rates and staggered prepayment penalties through the first five years of the loan. Approximately 5% of our multifamily and CRE loan portfolio is currently above their floor rates. With competitors pulling back from small-balance CRE, we see opportunities to improve our loan yield while maintaining low loan devalues and high debt service coverage. In our CNI loan book, our asset-based lender-financed commercial specialty real estate portfolios have rates that adjust to the index. Of the $3.3 billion of lender-financed commercial specialty real estate loans, approximately 70% are at their floor rates. Our equipment leasing portfolio, which accounts for the remaining $162 million of CNI loan outstanding, is comprised of fixed-rate loans and leases. On the funding side, We are well-positioned given the diversity of our consumer and commercial businesses and the optionality of our security-based deposits. Consumer deposits representing approximately 55% of our total deposits at 331-2020 is comprised of consumer direct checking, savings, money market, and non-interest-bearing prepaid accounts. Excluding consumer time deposits, our consumer checking, savings, and money market balances increased by $960 million from 12-31-2019 with strong growth in our non-interest-bearing prepaid and other interest-bearing demand deposit balances. We reduced our high-yield savings and money market deposit rates in March following the Fed's actions. We prepaid $200 million of brokered CDs with an average cost of funds of $271 and reissued a similar amount at $1.78 in the third quarter. Average non-interest-bearing deposits was $2.6 billion and the quarter ended March 31, 2020, up by almost $1 billion compared to the same period a year ago. We are making good progress in our specialty commercial and treasury management businesses, and our involvement with the SBA PPP program will provide additional momentum for small business and commercial deposits. Axos Clearing benefited from a flight to safety this quarter, with ending deposits increasing by approximately 16% when quartered at $413 million. These client deposits, held in approximately 90,000 individual brokerage accounts, provide a stable, low-cost source of funding. We have chosen to keep the majority of the $413 million in other banks, earning interest income for the securities business. We have the ability to bring these deposits back to our bank on relatively short notice to fund our loan growth. With the impact of consolidation in this industry, we continue to be bullish on the clearing company's long-term outlook. Overall, we feel good about our ability to maintain an annual net interest margin toward the lower end of our 3.8 to 4.0 target. With loan growth likely to be slowing in the short term, and some additional downward pricing flexibility in some of our deposit categories, we look to hold margins relatively stable. Now I'll turn the call over to Andy, who will provide additional details on our financial results.