Company: AFRM
Filing Date: 2025-05-09
Form Type: 10-Q
Source: 0001820953-25-000052
Chunk: 139

Company: Affirm Holdings, Inc.
Filing Date: 2025-05-09
Form: 10-Q
Item: Part I, Item 2
Chunk 139
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4. 

Gain on sales of loans 

Gain on sales of loans increased by $35.7 million, or 89%, and $137.6 million, or 108%, for the three and nine months ended March 31, 2025, respectively, compared to the same periods in 2024. The increase is driven by higher loan sale volume to third-party loan buyers and favorable transaction economics which are impacted by the composition of our loan portfolio sold and other market factors. We sold loans with an unpaid principal balance of $3.6 billion and $11.0 billion for the three and nine months ended March 31, 2025, respectively, compared to $2.1 billion and $7.3 billion for the same period in 2024. 

Servicing income 

Servicing income includes net servicing fee revenue and fair value adjustments for servicing assets and liabilities, and is recognized for loan portfolios sold to third-party loan buyers and for loans held within our off-balance sheet securitizations. Servicing fee revenue varies by contractual servicing fee arrangement and is earned as a percentage of the average unpaid principal balance of loans held by each counterparty where we have a servicing agreement. We reduce servicing income for certain fees we are required to pay per our contractual servicing arrangement.

With respect to fair value adjustments, we remeasure the fair value of servicing assets and liabilities each period and recognize the change in fair value in servicing income. We utilize a discounted cash flow approach to remeasure the fair value of servicing rights. Because we earn servicing income based on the outstanding principal balance of the portfolio, fair value adjustments are impacted by the timing and amount of loan repayments. As such, over the term of each loan portfolio sold, fair value adjustments for servicing assets will decrease servicing income and fair value adjustments for servicing liabilities will increase servicing income. We discuss our valuation methodology and significant Level 3 inputs for servicing assets and liabilities within Note 12. Fair Value of Financial Assets and Liabilities in the notes to the interim condensed consolidated financial statements. 

Servicing income increased by $6.8 million, or 27%, and $18.8 million, or 28%, for the three and nine months ended March 31, 2025, respectively, compared to the same periods in 2024. The increase is primarily due to an increase in net servicing fee revenue which is calculated as a percentage of the unpaid principal balance of off-balance sheet loans. The average unpaid principal balance of off-balance sheet loans increased