Company: AFRM
Filing Date: 2025-02-06
Form Type: 10-Q
Source: 0001820953-25-000012
Chunk: 137

Company: Affirm Holdings, Inc.
Filing Date: 2025-02-06
Form: 10-Q
Item: Part I, Item 2
Chunk 137
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 affect, our business and results of operations in the following ways:

•Shifts in consumer demand: Over the past two fiscal years, we have experienced varying levels of consumer demand across different categories of merchandise. While all merchandise categories except for Sporting Goods and Outdoors grew year-over-year, economic uncertainty, inflationary pressures and elevated interest rates remain. If macroeconomic conditions deteriorate in future periods, consumer demand may be negatively impacted.

•Increased borrowing costs: The Federal Reserve began decreasing the federal funds interest rate in late 2024, leading to a decline in our average funding costs. Despite this, the overall interest rate environment remains elevated compared to historical levels and, as a result, we may continue to experience higher transaction costs.

•Volatile capital markets: Since fiscal 2024, capital markets have shown improvement against recent periods, which has been evidenced by substantial additions across our funding channels due to our strong loan performance. However, despite these improvements, uncertainties remain in the macroeconomic environment, especially with regard to inflation and the potential for increased unemployment. To address these uncertainties, we leverage our diverse funding channels and counterparties, which contribute to our resilience across various macroeconomic conditions and economic cycles.

Consumer Credit Optimization and Loan Performance

We continue to optimize our underwriting and take other actions to manage consumer loan repayment, increase collections and minimize losses. For example, we offer loan modifications to borrowers experiencing 

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financial difficulty to provide greater flexibility for consumers to repay their obligations, through payment deferrals or loan re-amortizations. A payment deferral extends the next payment due date, and while a consumer may receive more than one deferral, the total deferral period may not exceed three months. A loan re-amortization lowers the monthly payments by extending the term, which may not exceed twenty-four months.

These loan modification programs also impact our delinquency rates, and such impact can vary over time. As disclosed in Note 4. Loans Held for Investment and Allowance for Credit Losses in the notes to the interim condensed consolidated financial statements, in fiscal 2024, we expanded the eligibility of our loan modification programs, which resulted in a modest benefit to delinquency rates for loans held for investment during that period. The volume of loan modifications during the fiscal quarter ended December 31, 2024 decreased compared to the same periods in 2023. Loans modified during the three and twelve months ended December 31, 2024, represent 0.15% and 0.29%, respectively, of the outstanding principal