Company: AX
Filing Date: 2025-08-21
Form Type: 10-K
Source: 0001299709-25-000125
Chunk: 126

Company: Axos Financial, Inc.
Filing Date: 2025-08-21
Form: 10-K
Item: Item 7
Chunk 126
---
 allowance for credit losses for its held-for-investment loan and net investment in leases portfolio as well as lending commitments, excluding loans measured at fair value in accordance with applicable accounting standards, which represents management’s estimate of the expected lifetime credit losses on the loans and net investment in leases. The estimate of the allowance for credit losses includes both a quantitative and qualitative assessment, both of which include variables that are subject to uncertainty.

The quantitative assessment reflects modeled outputs utilizing economic scenarios and forecasts, which are subject to uncertainty, and is also based on the Company’s current and expected future economic outlook. Key economic variables considered in the quantitative assessment include factors such as the U.S. unemployment rate and interest rates, both of which impact the default rate of the loan pools. Additionally, the results of the quantitative assessment are impacted by the third-party macroeconomic forecasts across various economic scenarios. The Company periodically reviews and adjusts the weighting of scenarios based on management’s allowance for credit losses (“ACL”) framework. Adjustment of scenario weighting away from the baseline scenario to the adverse scenario should increase the allowance for credit losses on the Company’s held-for-investment loan and net investment in leases portfolio, all else remaining equal. Economic forecasts that impacted management’s assessment of scenario weightings included interest rates, inflation, changes in trade policies, and geopolitical unrest. Changes in one or more of these variables can cause a significant change in the estimate of the allowance for credit losses. 

Additionally, management performs a qualitative assessment to address inherent limitations in the model and data. Qualitative criteria used in the assessment, as outlined in Note 1—“Organizations and Summary of Significant Accounting Policies” in the Consolidated Financial Statements, can require significant judgment and is subject to uncertainty.

For further information on the allowance for credit losses, refer to Note 1—“Organizations and Summary of Significant Accounting Policies” and Note 5—“Loans & Allowance for Credit Losses” in the Consolidated Financial Statements.

USE OF NON-GAAP FINANCIAL MEASURES

In addition to the results presented in accordance with GAAP, this report includes non-GAAP financial measures such as adjusted earnings, adjusted earnings per common share, and tangible book value per common share. Non-GAAP financial measures have inherent limitations, may not be comparable to similarly titled measures used by other companies and are not audited. Readers should be aware of these limitations and should be cautious as to their reliance on such measures. We believe the non-GAAP financial measures disclosed in this release enhance investors’ understanding of our business and performance