Company: AX
Filing Date: 2025-08-21
Form Type: 10-K
Source: 0001299709-25-000125
Chunk: 2

Company: Axos Financial, Inc.
Filing Date: 2025-08-21
Form: 10-K
Item: Item 7A
Chunk 2
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 primarily use on-balance sheet products for balance sheet hedging. ALCO makes adjustments to the overall MVE sensitivity by recommending investment and borrowing strategies. The management team then executes the recommended strategy by increasing or decreasing the duration of the investments and borrowings, resulting in the appropriate level of market risk the Board of Directors wants to maintain. Other examples of ALCO policies designed to reduce our interest rate risk include limiting the premiums paid to purchase mortgage loans or mortgage-backed securities. This policy addresses mortgage prepayment risk by capping the yield loss from an unexpected high level of mortgage loan prepayments. At least once a quarter, ALCO members report to our Board of Directors the status of our interest rate risk profile.

We measure interest rate sensitivity as the difference between amounts of interest-earning assets and interest-bearing liabilities that mature or contractually re-price within a given period of time. The difference, or the interest rate sensitivity gap, provides an indication of the extent to which an institution’s interest rate spread will be affected by changes in interest rates. A gap is considered positive (or asset sensitive) when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities and negative (or liability sensitive) when the amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. 

Absent any subsequent asset and liability actions by management, in a rising interest rate environment, an institution with a positive gap would be in a better position than an institution with a negative gap to invest in higher yielding assets or to have its asset yields adjusted upward, which would cause the yield on its assets to increase at a faster pace than the cost of its interest-bearing liabilities. Conversely, absent any subsequent asset and liability actions by management, during a period of falling interest rates, an institution with a positive gap would tend to have its assets reprice at a faster rate than one with a negative gap, which would tend to reduce the growth in its net interest income.

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Banking Business Segment

The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities that were outstanding at June 30, 2025 and the portions of each financial instrument that are expected to mature or reset interest rates in each future period:

Term to Repricing, Repayment, or Maturity atJune 30, 2025(Dollars in thousands)Six Months or LessOver Six Months Through One YearOver OneYearthroughFive YearsOver FiveYearsTotalInterest-earning assets:Cash and cash equivalents$2,005,060 $— $—