Company: AFRM
Filing Date: 2025-05-09
Form Type: 10-Q
Source: 0001820953-25-000052
Chunk: 50

Company: Affirm Holdings, Inc.
Filing Date: 2025-05-09
Form: 10-Q
Item: Part I, Item 1
Chunk 50
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 value. Whenever available, the fair value is based on quoted bid prices as of the end of the trading day. When quoted prices are not available, other methods may be utilized including evaluated prices provided by third-party pricing services.

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Derivative InstrumentsAs of March 31, 2025 and June 30, 2024, we used a combination of interest rate cap agreements and interest rate swaps to manage interest costs and the risks associated with variable interest rates. These derivative instruments are classified as Level 2 within the fair value hierarchy, and the fair value is estimated by using third-party pricing models, which contain certain assumptions based on readily observable market-based inputs. We validate the valuation output on a monthly basis. Refer to Note 11. Derivative Financial Instruments in the notes to the interim condensed consolidated financial statements for further details on our derivative instruments.Assets and Liabilities Measured at Fair Value on a Recurring Basis using Significant Unobservable Inputs (Level 3)We evaluate our assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. Since our servicing assets and liabilities, performance fee liability, securitization notes and residual trust certificates, profit share liability, and risk sharing arrangements do not trade in an active market with readily observable prices, we use significant unobservable inputs to measure fair value and have classified as level 3 within the fair value hierarchy. This determination requires significant judgments to be made.Servicing Assets and LiabilitiesWe 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, $2.1 billion and $7.3 billion for the three and nine months ended March 31, 2024, respectively, for which we retained servicing rights. As of March 31, 2025 and June 30, 2024, we serviced loans which we sold with a remaining unpaid principal balance of $6.8 billion and $5.1 billion, respectively.We use discounted cash flow models to arrive at an estimate of fair value. Significant assumptions used in the valuation of our servicing rights are as follows:Adequate CompensationWe estimate adequate compensation as the rate a willing market participant would require for servicing loans with similar characteristics as those in the serviced portfolio. Discount RateEstimated future payments to be received under servicing agreements are discounted as a part of determining the fair value of the servicing rights. For servicing rights on loans, the