Company: AFRM
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0001628280-25-050295
Chunk: 132

Company: Affirm Holdings, Inc.
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 2
Chunk 132
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 the ordinary course of business, we engage in activities that are not reflected within our interim condensed consolidated balance sheets, generally referred to as off-balance sheet arrangements. These activities involve transactions with unconsolidated VIEs, including securitization and forward flow transactions. Across these transactions, ongoing involvement typically includes contractual loan servicing arrangements and loan repurchase obligations in connection with breaches in ordinary course of business representations and warranties.

We have entered into unconsolidated securitization transactions where Affirm is the sponsor and risk retention holder, Affirm could experience a loss of up to 5% of both the senior notes and residual trust certificates. In the unlikely event principal payments on the loans backing any off-balance sheet securitization are insufficient to pay holders of senior notes and residual trust certificates, including any retained interests held by Affirm, then any amounts we contributed to the securitization reserve accounts may be depleted.

Under certain other forward flow loan sale arrangements with third-party loan buyers, we have entered into risk sharing agreements where we may be required to make a payment to the loan buyer or are entitled to receive a payment from the loan buyer, depending on the actual versus expected loan performance as contractually agreed to with the counterparty, and subject to a cap based on a percentage of the principal balance of loans sold.

In addition to risk sharing arrangements, we may hold beneficial interests in certain off-balance sheet VIEs that have been established by third-party loan buyers in connection with structured transactions. These beneficial interests represent our right to receive a portion of the residual cash flows from the underlying loans sold in connection with these transactions. 

Risk sharing arrangements and beneficial interests are considered variable interests in the unconsolidated VIEs holding the loan assets transferred, as their value is exposed to the performance of those loans. For off-balance sheet VIEs where we hold variable interest, we have determined that our exposure to transaction economics is insignificant relative to the expected losses or residual returns. 

As of September 30, 2025, the aggregate outstanding balance of loans held by third-party investors and off-balance sheet securitizations was $8.5 billion. Refer to Note 9. Securitization and Variable Interest Entities and Note 12. Fair Value of Financial Assets and Liabilities of the accompanying notes to our interim condensed consolidated financial statements for more information.

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Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,