Affirm Holdings, Inc.
For the period ended Sep 30, 2026. Filed Nov 5, 2026.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 5, 2026
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12. Fair Value of Financial Assets and Liabilities
- Fair Value of Financial Assets and Liabilities
Financial Assets and Liabilities Recorded at Fair Value
The following tables present information about our assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2026 and June 30, 2026 (in thousands):
| Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|
| Assets: | ||||
| Cash and cash equivalents: | ||||
| Money market funds | $243,018 | $— | $— | $243,018 |
| Certificates of deposit | — | 6,096 | — | 6,096 |
| Commercial paper | — | 37,745 | — | 37,745 |
| Government bonds- US | — | 10,434 | — | 10,434 |
| Securities, available for sale: | ||||
| Certificates of deposit | — | 88,205 | — | 88,205 |
| Corporate bonds | — | 298,345 | — | 298,345 |
| Commercial paper | — | 221,620 | — | 221,620 |
| Municipal bonds | — | 5,090 | — | 5,090 |
| Government bonds: | ||||
| Non-US | — | 2,185 | — | 2,185 |
| US | — | 257,762 | — | 257,762 |
| Securitization notes receivable and residual trust certificates | — | — | 47,791 | 47,791 |
| Residual interests in structured transactions | — | — | 5,829 | 5,829 |
| Other | 2,396 | — | 5,981 | 8,377 |
| Servicing assets | — | — | 586 | 586 |
| Interest rate derivatives | — | 7,517 | — | 7,517 |
| Risk sharing asset | — | — | 26,387 | 26,387 |
| Total assets | $245,414 | $934,999 | $86,574 | $1,266,987 |
| Liabilities: | ||||
| Performance fee liability | — | — | 2,601 | 2,601 |
| Profit share liability | — | — | 714 | 714 |
| Interest rate derivatives | — | 122 | — | 122 |
| Total liabilities | $— | $122 | $3,315 | $3,437 |
| Level 1 | Level 2 | Level 3 | Total | |
|---|---|---|---|---|
| Assets: | ||||
| Cash and cash equivalents: | ||||
| Money market funds | $237,815 | $— | $— | $237,815 |
| Commercial paper | — | 25,979 | — | 25,979 |
| Government bonds - US | — | 5,987 | — | 5,987 |
| Securities, available for sale: | ||||
| Certificates of deposit | — | 71,857 | — | 71,857 |
| Corporate bonds | — | 316,840 | — | 316,840 |
| Commercial paper | — | 197,114 | — | 197,114 |
| Municipal bonds | — | 8,655 | — | 8,655 |
| Government bonds: | ||||
| Non-US | — | 2,169 | — | 2,169 |
| US | — | 296,344 | — | 296,344 |
| Securitization notes receivable and residual trust certificates | — | — | 68,358 | 68,358 |
| Residual interests in structured transactions | — | — | 5,582 | 5,582 |
| Other | 773 | — | 5,723 | 6,496 |
| Servicing assets | — | — | 821 | 821 |
| Interest rate derivatives | — | 3,849 | — | 3,849 |
| Risk sharing asset | — | — | 30,301 | 30,301 |
| Total assets | $238,588 | $928,794 | $110,785 | $1,278,167 |
| Liabilities: | ||||
| Performance fee liability | — | — | 2,459 | 2,459 |
| Profit share liability | — | — | 1,056 | 1,056 |
| Interest rate derivatives | — | 65 | — | 65 |
| Total liabilities | $— | $65 | $3,515 | $3,580 |
As of September 30, 2026 and June 30, 2026, there were no transfers between levels.
Assets and Liabilities Measured at Fair Value on a Recurring Basis (Level 2)
Cash and Cash Equivalents and Securities Available for Sale
As of September 30, 2026 and June 30, 2026, we held level 2 debt securities classified as cash and cash equivalents and securities available for sale. Management obtains pricing from one or more third-party pricing services for the purpose of determining fair 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.
Interest Rate Derivatives
As of September 30, 2026 and June 30, 2026, we used a combination of interest rate cap, swap, and collar agreements 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 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, residual interests in structured transactions, 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 them as level 3 within the fair value hierarchy. This determination requires significant judgments to be made.
The following significant unobservable inputs, as applicable, were used in the fair value measurement of the Company’s Level 3 assets and liabilities:
Adequate Compensation - The compensation rate is expressed as an annualized percentage of the outstanding loan balance that a willing market participant would require for servicing loans with similar characteristics.
Discount Rate - The rate used to discount estimated future cash flows to present value in determining fair value. It reflects the rate of return market participants would require to compensate for time value of money plus a premium based on relative risk, liquidity and other market based factors.
Default Rate - The estimated annualized rate of charge-offs affecting the projected unpaid principal balance of the loan portfolio.
Loss Rate - The estimated lifetime rate of loan charge-offs, net of recoveries, as a percentage of the initial settled principal balance.
Prepayment Rate - The estimated annualized excess loan payment received in a given month as a percentage of the outstanding principal balance at the beginning of the month minus the scheduled principal payment.
Refund Rate - The rate of refunded transactions as a percentage of the outstanding loan balance over the remaining life of the loan portfolio.
Program Profitability - The estimated future profit to be shared with enterprise partners as a percentage of total loans outstanding, based on the terms of the respective commercial agreements.
Significant increases or decreases in any of the inputs in isolation could result in a significantly lower or higher fair value measurement.
Servicing Assets and Liabilities
We sold loans with an unpaid principal balance of $6.3 billion and $4.9 billion for the three months ended September 30, 2026 and 2025, respectively, for which we retained servicing rights.
As of September 30, 2026 and June 30, 2026, we serviced loans which we sold with a remaining unpaid principal balance of $10.8 billion and $10.0 billion, respectively. We earned $48.5 million and $39.7 million of servicing income for the three months ended September 30, 2026 and 2025, respectively.
We use discounted cash flow models to arrive at an estimate of fair value. As of September 30, 2026 and June 30, 2026, the aggregate fair value of the servicing assets was measured at $0.6 million and $0.8 million, respectively, and presented within other assets in the interim condensed consolidated balance sheets. There were no servicing liabilities as of September 30, 2026 and June 30, 2026. For certain servicing agreements, the contractual servicing fee equals the adequate compensation assumption, resulting in a fair value of zero. There was no material activity related to servicing assets and liabilities, including both the initial recognition upon loan sales and subsequent changes in fair value, during the periods presented in our interim condensed consolidated statements of operations and comprehensive income.
Significant unobservable inputs used in our Level 3 fair value measurements of servicing assets and liabilities include default rates, discount rates, and adequate compensation assumptions. When the adequate compensation assumption is held constant, adverse changes in the default rate and discount rate assumptions are not expected to result in a material change to the fair values of servicing assets or liabilities. A hypothetical increase in the adequate compensation assumption of 10% or 20% would have the following impacts:
As of September 30, 2026: The fair value of servicing assets would decrease by approximately $0.8 million and $1.6 million, respectively, resulting in the derecognition of the $0.6 million servicing asset and the recognition of servicing liabilities of approximately $0.2 million or $1.0 million, respectively. For the agreements currently measured at zero fair value, estimated servicing liabilities of approximately $7.3 million and $14.6 million, respectively, would be recognized.
As of June 30, 2026: The fair value of servicing assets would decrease by approximately $1.3 million and $2.5 million, respectively, resulting in the derecognition of the $0.8 million servicing asset and the recognition of servicing liabilities of approximately $0.4 million or $1.7 million, respectively. For the agreements currently measured at zero fair value, estimated servicing liabilities of approximately $6.4 million and $12.8 million, respectively, would be recognized.
Performance Fee Liability
In accordance with our agreements with our originating bank partners, we pay a fee for each loan that is fully repaid by the consumer, due at the end of the period in which the loan is fully repaid. We recognize a liability upon the purchase of a loan for the expected future payment of the performance fee. This liability is measured using a discounted cash flow model and recorded at fair value and presented within accrued expenses and other liabilities in the interim condensed consolidated balance sheets. Any changes in the fair value of the liability are reflected in other income, net, in the interim condensed consolidated statements of operations and comprehensive income.
As of September 30, 2026 and June 30, 2026, the aggregate fair value of the performance fee liability was measured at $2.6 million and $2.5 million, respectively. Activity related to the performance fee liability, including initial recognition upon purchases of loans, settlements, and subsequent changes in fair value, was not material during the periods presented in our interim condensed consolidated statements of operations and comprehensive income.
The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the performance fee liability as of September 30, 2026 and June 30, 2026:
| Unobservable Input | Minimum | Maximum | Weighted Average (1) |
|---|---|---|---|
| Discount Rate | 6.06% | 10.00% | 8.42% |
| Refund Rate | 1.50% | 1.50% | 1.50% |
| Loss Rate | 0.73% | 4.65% | 3.25% |
| Unobservable Input | Minimum | Maximum | Weighted Average (1) |
|---|---|---|---|
| Discount Rate | 6.06% | 10.00% | 8.53% |
| Refund Rate | 1.50% | 1.50% | 1.50% |
| Loss Rate | 0.73% | 4.65% | 3.21% |
(1)Unobservable inputs were weighted by principal balances of loans subject to performance fees
Adverse changes in discount rate, refund rate, or loss rate assumptions are not expected to result in a material change in the fair value of the performance fee liability.
Securitization Notes Receivable and Residual Trust Certificates
We hold notes receivable and residual trust certificatesin connection with unconsolidated securitizations. The balances correspond to the 5% economic risk retention we are required to maintain as the securitization sponsor.
These assets are measured at fair value using a discounted cash flow model, and presented within securities available for sale at fair value in the interim condensed consolidated balance sheets. Changes in the fair value, other than declines in fair value due to credit recognized as an allowance, are reflected inother comprehensive income in the interim condensed consolidated statements of operations and comprehensive income. Declines in fair value due to credit are reflected inother income, net in the interim condensed consolidated statements of operations and comprehensive income.
The following table summarizes the activity related to the fair value of the notes receivable and residual trust certificates (in thousands):
| Three Months Ended September 30, | ||
|---|---|---|
| 2026 | 2025 | |
| Fair value at beginning of period | $68,358 | $75,469 |
| Cash received (due to payments) | (21,393) | (22,567) |
| Change in unrealized gain (loss) | 8 | (38) |
| Accrued interest | 852 | 1,210 |
| Reversal of (impairment on) securities available for sale | (34) | 189 |
| Fair value at end of period | $47,791 | $54,263 |
The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the notes receivable and residual trust certificates as of September 30, 2026 and June 30, 2026:
| Unobservable Input | Minimum | Maximum | Weighted Average (2) |
|---|---|---|---|
| Discount Rate | 2.58% | 22.60% | 5.12% |
| Default Rate(1) | 6.33% | 10.39% | 9.71% |
| Prepayment Rate | 15.77% | 26.00% | 22.61% |
| Unobservable Input | Minimum | Maximum | Weighted Average (2) |
|---|---|---|---|
| Discount Rate | 0.82% | 22.60% | 5.14% |
| Default Rate(1) | 5.37% | 9.98% | 9.65% |
| Prepayment Rate | 20.17% | 26.52% | 25.48% |
(1)The cumulative loss relative to the outstanding balance as of September 30, 2026 and June 30, 2026
(2)Unobservable inputs were weighted by relative fair value
Significant unobservable inputs used in our Level 3 fair value measurements ofnotes receivable and residual trust certificates include default rates, discount rates, and prepayment rate assumptions. When the default rate assumption is held constant, adverse changes in the discount rate and prepayment rate assumptions are not expected to result in a material change to the fair values of thenotes receivable and residual trust certificates. A hypothetical increase in the default rate assumption of 25% or 50% would have the following impacts:
As of September 30, 2026: The fair value ofnotes receivable and residual trust certificates would decrease by approximately $2.3 million and $2.7 million, respectively.
As of June 30, 2026: The fair value ofnotes receivable and residual trust certificates would decrease by approximately $2.8 million and $3.5 million, respectively.
Residual Interests in Structured Transactions
We hold residual interests in structured transactions in connection with certain forward flow loan sale transactions.
These assets are measured at fair value using a discounted cash flow model, and presented within securities available for sale at fair value in the interim condensed consolidated balance sheets. Changes in the fair value, except for credit impairments, are reflected inother comprehensive income in the interim condensed consolidated statements of operations and comprehensive income.
The following table summarizes the activity related to the fair value of the assets (in thousands):
| Three Months Ended September 30, | ||
|---|---|---|
| 2026 | 2025 | |
| Fair value at beginning of period | $5,582 | $2,284 |
| Capital contribution | 1,612 | 1,579 |
| Cash distribution received | (1,072) | — |
| Accrued interest | 349 | — |
| Subsequent changes in fair value | (643) | 154 |
| Fair value at the end of period | 5,829 | 4,017 |
Significant unobservable inputs used for our Level 3 fair value measurement of the residual interests are the discount rate, default rate, and prepayment rate. As of September 30, 2026 and June 30, 2026, the assumptions used in our discounted cash flow model were as follows: discount rate of 20.00% and 20.00%, default rate of 10.28% and 10.42%, and prepayment rate of 45.07% and 45.61%, respectively.
Adverse changes in discount rate, default rate, or prepayment rate assumptions are not expected to result in a material change in the fair value of residual interests in structured transactions.
Profit Share Liability
We have commercial agreements with certain enterprise partners, in which we are obligated to share in the profitability of transactions facilitated by our platform. Upon capture of a loan under these programs, we record a liability associated with the estimated future profit to be shared over the life of the loan based on estimated profitability levels of each program. The liability is measured using a discounted cash flow model and recorded at fair value and presented within accrued expenses and other liabilities in the interim condensed consolidated balance sheets.
The following table summarizes the activity related to the fair value of the profit share liability (in thousands):
| Three Months Ended September 30, | ||
|---|---|---|
| 2026 | 2025 | |
| Fair value at beginning of period | $1,056 | $9,323 |
| Facilitation of loans | 326 | 3,147 |
| Actual performance | (1,138) | (5,096) |
| Subsequent changes in fair value | 470 | 218 |
| Fair value at end of period | $714 | $7,592 |
The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the profit share liability as of September 30, 2026 and June 30, 2026:
| Unobservable Input | Minimum | Maximum | Weighted Average (1) |
|---|---|---|---|
| Discount Rate | 30.00% | 30.00% | 30.00% |
| Program Profitability | 0.89% | 2.52% | 2.49% |
| Unobservable Input | Minimum | Maximum | Weighted Average (1) |
|---|---|---|---|
| Discount Rate | 30.00% | 30.00% | 30.00% |
| Program Profitability | 0.89% | 2.43% | 2.31% |
(1)Unobservable inputs were weighted by relative fair value
Adverse changes in discount rate and program profitability assumptions are not expected to result in a material change in the fair value of profit share liability.
Risk Sharing Arrangements
In connection with certain capital funding 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. Loan performance is evaluated at a cohort level based on the month or quarter loans were sold.
We account for these arrangements as derivatives measured at fair value with gains and losses recognized in gain on sales of loans in our interim condensed consolidated statements of operations and comprehensive income. For each counterparty, we have recognized a net asset or net liability based on the estimated fair value of future payments we expect to receive from or make to the counterparty. As of September 30, 2026 and June 30, 2026, we estimated the fair value of future settlements using a discounted cash flow model. There were no risk sharing liabilities as of September 30, 2026 and June 30, 2026.
The following table summarizes the activity related to the fair value of the risk sharing assets (in thousands):
| Three Months Ended September 30, | ||
|---|---|---|
| 2026 | 2025 | |
| Fair value at beginning of period | $30,301 | $43,179 |
| Initial transfers of financial assets | 4,826 | 6,508 |
| Settlements | (10,091) | (8,340) |
| Subsequent changes in fair value | 1,351 | 218 |
| Fair value at end of period | $26,387 | $41,565 |
The following tables present quantitative information about the significant unobservable inputs used for our Level 3 fair value measurement of the risk sharing arrangements as of September 30, 2026 and June 30, 2026:
| Unobservable Input | Minimum | Maximum | Weighted Average (1) | |
|---|---|---|---|---|
| Risk sharing assets | Discount Rate | 20.00% | 20.00% | 20.00% |
| Loss Rate | 3.35% | 4.95% | 4.22% |
| Unobservable Input | Minimum | Maximum | Weighted Average (1) | |
|---|---|---|---|---|
| Risk sharing assets | Discount Rate | 7.00% | 20.00% | 17.95% |
| Loss Rate | 3.35% | 4.96% | 4.16% | |
| Prepayment Rate | 17.72% | 22.13% | 19.80% |
(1)Unobservable inputs were weighted by principal balance of loans sold under each cohort
The following table summarizes the effect that adverse changes in estimates would have on the fair value of the risk sharing assets given hypothetical changes in significant unobservable inputs (in thousands):
| September 30, 2026 | June 30, 2026 | |
|---|---|---|
| Risk sharing assets | ||
| Prepayment Rate assumption (1): | ||
| Prepayment Rate decrease of 25% | $— | $(1,638) |
| Prepayment Rate decrease of 50% | $— | $(3,382) |
| Loss Rate assumption: | ||
| Loss Rate increase of 25% | $(13,637) | $(13,647) |
| Loss Rate increase of 50% | $(27,273) | $(27,292) |
| Discount Rate assumption: | ||
| Discount Rate increase of 25% | $(538) | $(554) |
| Discount Rate increase of 50% | $(1,041) | $(1,072) |
(1)Prepayment rate is not a significant unobservable input for the risk sharing asset balance as of September 30, 2026.
Financial Assets and Liabilities Not Recorded at Fair Value
The following table presents the fair value and our assessment of the classification of this measurement within the fair value hierarchy for financial assets and liabilities held at amortized cost as of September 30, 2026 and June 30, 2026 (in thousands):
| Carrying Amount | Level 1 | Level 2 | Level 3 | Balance at Fair Value | |
|---|---|---|---|---|---|
| Assets: | |||||
| Loans held for investment, net | 9,478,472 | — | — | 10,318,626 | 10,318,626 |
| Total assets | $9,478,472 | $— | $— | $10,318,626 | $10,318,626 |
| Liabilities: | |||||
| Convertible senior notes, net (1) | $1,130,556 | $— | $1,175,756 | $— | $1,175,756 |
| Notes issued by securitization trusts | 6,221,183 | — | — | 6,202,942 | 6,202,942 |
| Funding debt | 2,904,541 | — | — | 2,929,009 | 2,929,009 |
| Total liabilities | $10,256,280 | $— | $1,175,756 | $9,131,951 | $10,307,707 |
| Carrying Amount | Level 1 | Level 2 | Level 3 | Balance at Fair Value | |
|---|---|---|---|---|---|
| Assets: | |||||
| Loans held for sale | $1 | $— | $1 | $— | $1 |
| Loans held for investment, net | 8,997,447 | — | — | 9,814,199 | 9,814,199 |
| Total assets | $8,997,448 | $— | $1 | $9,814,199 | $9,814,200 |
| Liabilities: | |||||
| Convertible senior notes, net (1) | $1,129,581 | $— | $1,286,525 | $— | $1,286,525 |
| Notes issued by securitization trusts | 5,331,229 | — | — | 5,341,418 | 5,341,418 |
| Funding debt | 3,333,248 | — | — | 3,359,290 | 3,359,290 |
| Total liabilities | $9,794,058 | $— | $1,286,525 | $8,700,708 | $9,987,233 |
(1)The estimated fair value of the convertible senior notes is determined based on a market approach, using the estimated or actual bids and offers of the notes in an over-the-counter market on the last business day of the period.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.