LOANS ISSUED

9 Months Ended

Dec. 31, 2024

Loans and Leases Receivable Disclosure [Abstract]

Loans issued as of December 31, 2024, consisted of the following:


	Amount Outstanding		Due Dates	Average Interest Rate	Fair Value of Collateral		Loan Currency

Mortgage loans	$	809,608	January 2025 - December 2049	11.1%	$	809,608	KZT
Uncollateralized bank customer loans	223,646		January 2025 - December 2044	27.7%	—		KZT
Collateralized bank customer loans	170,574		January 2025 - July 2043	16.0%	125,656		KZT
Car loans	164,251		January 2025 - April 2032	24.1%	163,375		KZT
Right of claim for purchased retail loans	135,242		January 2025 - February 2030	15.0%	135,242		KZT
Subordinated loan	6,163		December 2025	3.0%	—		USD
Other	1,372		January 2025 - September 2029	18.0%/16.5%	27		KZT

Allowance for loans issued	(56,597)

Total loans issued	$	1,454,259

The Group provides mortgage loans to borrowers on behalf of the JSC Kazakhstan Sustainability Fund (the "Program Operator") related to the state mortgage program "7-20-25" and transfers the rights to claim on the mortgage loans to the Program Operator. The proceeds received from these transfers are presented within funds received under state program for financing of mortgage loans in the Condensed Consolidated Statements of Cash Flows. Under this program, borrowers can receive a mortgage at an interest rate of 7% for 20 years, and the interest payments received by the Group are recognized as interest income in the Company’s Consolidated Statements of Operations and Statements of Other Comprehensive Income. In accordance with the program and trust management agreement for the program, the Group services the transferred loans and remits all repayments of principal it receives plus 4% of the 7% interest received to the Program Operator. The interest paid to the Program Operator is recognized as interest expense in the Condensed Consolidated Statements of Operations and Statements of Other Comprehensive Income. The remaining 3% of the 7% interest is retained by Group. Under the program and trust management agreement, the Group is required to repurchase the rights to make claims on the transferred loans when either loan principal repayments or interest payments are overdue 90 days or more. The repurchase of overdue loans is performed at the loans’ nominal value and is presented within repurchase of mortgage loans under the State Program in the Condensed Consolidated Statements of Cash Flows.

Since the Group transfers the rights to make claims on the loans with recourse for loans that are more than 90 days past due, retains part of the interest received on the loans and agrees to service the loans after the sale of the loans to the Program Operator, the Company has determined that the Group retains control over the loans transferred and continues recognizing the loans, which are accounted for as secured borrowings of the Group in accordance with ASC 860, Transfers and Servicing. As the Company continues to recognize the loans as assets, it also recognizes the associated liability equal to the proceeds received from the Program Operator, which is presented separately as liability arising from continuing involvement in the Condensed Consolidated Balance Sheets. This liability accrues 4% interest annually as described above. As of December 31, 2024 and March 31, 2024, the corresponding liability amounted to $472,867 and $521,885, respectively.

As of December 31, 2024 and March 31, 2024, mortgage loans include loans under the state mortgage program "7-20-25" with an aggregate principal amount of $484,237 and $532,389, respectively, were presented within loans issued in the Condensed Consolidated Balance Sheets.

The Group has an agreement with FFIN Credit, a company established and controlled by FRHC's controlling shareholder, chairman and chief executive officer, Mr. Timur Turlov, to purchase uncollateralized retail loans from FFIN Credit. FFIN Credit is a non-bank credit institution that issues loans in Kazakhstan under simplified lending procedures. FFIN Credit was created as a pilot project to test and improve the scoring models used for qualifying and issuing loans. The principal operation of FFIN Credit is to provide loans to customers online using biometric identification and its proprietary scoring process. After completion of the pilot project, it is anticipated that FFIN Credit will be sold by Mr. Turlov to the Company. Freedom Bank KZ has legal ownership over the loans purchased from FFIN Credit. However, in accordance with U.S. GAAP, the Group does not recognize those loans, since effective control over the transferred loans are maintained by FFIN Credit. Instead, the Group recognizes the loans receivable from FFIN Credit as right of claim for purchased retail loans on the Consolidated Balance Sheets within loans issued. As of December 31, 2024 and March 31, 2024, right of claims for purchased retail loans amounted to $135,242 and $146,152, respectively.

The total accrued interest for loans issued amounted to $11,874 as of December 31, 2024 and $8,327 as of March 31, 2024.

Loans issued as of March 31, 2024, consisted of the following:


	Amount Outstanding		Due Dates	Average Interest Rate	Fair Value of Collateral		Loan Currency

Mortgage loans	$	741,312	April, 2024 - March, 2049	10.3%	$	740,462	KZT
Car loans	262,708		April, 2024 - March, 2031	23.9%	259,755		KZT
Uncollateralized bank customer loans	245,188		April, 2024 - March, 2044	27.4%	—		KZT
Right of claim for purchased retail loans	146,152		April, 2024 - March, 2029	15.0%	146,152		KZT
Collateralized bank customer loans	22,299		June, 2024 - July, 2043	19.1%	22,270		KZT
Subordinated loan	5,037		December, 2025	3.0%	—		USD
Other	2,638		April, 2024 - January, 2029	18.6%/15.0%/2.5%	18		KZT/USD/EUR

Allowance for loans issued	(43,619)

Total loans issued	$	1,381,715

Credit quality indicators

Freedom Bank KZ uses a loan portfolio quality classification system that indicates signs of a significant increase in credit risk and contractual impairment, depending on the analysis of reasonable and supportable information available at the reporting date. The loan portfolio is classified into “not credit impaired”, “with significant increase in credit risk” and “credit impaired” agreements.

Loans “not credit impaired” under the agreement are serviced as usual, there are no primary signs of an increase in credit risk. Agreements classified as “with significant increase in credit risk” represent loans for which there is an increase in the credit risk expected over the life of the agreement compared to the initial risk at the date of recognition of the loan. In practice, the sign of such classification is the presence of overdue debt on principal and interest for a period of more than 30 days or the absolute probability of default threshold (PD) exceeding 20%. Agreements classified as “credit impaired” represent loans for which at the reporting date any of the following conditions is met: (i) the individual borrower has been in default for 90 or more days or the borrowers being legal entities have been in default for 60 or more days, (ii) the borrower for the last 6 months (for individuals) and 12 months (for legal entities) restructured the contract due to the deterioration of the financial condition, (iii) the borrower is recognized as credit impaired, a sign of default or a sign of bankruptcy is present, (iv) the deterioration of the financial performance of the borrower, or (v) the presence of other information indicating the existence of a high credit risk.

The table below presents the Group's loan portfolio by credit quality classification and origination year as of December 31, 2024. Current vintage disclosure is the requirement due to first adoption of ASC 326.


	Term Loans by Origination Fiscal Year
	2025		2024		2023		2022		2021		Prior		Revolving loans		Total
Mortgage loans	$	228,661	$	185,989	$	364,422	$	30,536	$	—	$	—	$	—	$	809,608
that are not credit impaired	228,546		184,058		362,030		29,928		—		—		—		804,562
with significant increase in credit risk	115		897		1,200		276		—		—		—		2,488
that are credit impaired	—		1,034		1,192		332		—		—		—		2,558
Car loans	2,778		123,984		37,489		—		—		—		—		164,251
that are not credit impaired	2,778		119,315		29,947		—		—		—		—		152,040
with significant increase in credit risk	—		1,271		569		—		—		—		—		1,840
that are credit impaired	—		3,398		6,973		—		—		—		—		10,371
Uncollateralized bank customer loans	77,127		126,817		19,702		—		—		—		—		223,646
that are not credit impaired	76,217		113,674		17,277		—		—		—		—		207,168
with significant increase in credit risk	488		4,098		666		—		—		—		—		5,252
that are credit impaired	422		9,045		1,759		—		—		—		—		11,226
Right of claim for purchased retail loans	92,412		40,147		2,667		16		—		—		—		135,242
that are not credit impaired	92,412		40,147		2,667		16		—		—		—		135,242
with significant increase in credit risk	—		—		—		—		—		—		—		—
that are credit impaired	—		—		—		—		—		—		—		—
Collateralized bank customer loans	161,626		8,793		155		—		—		—		—		170,574
that are not credit impaired	161,591		8,627		155		—		—		—		—		170,373
with significant increase in credit risk	35		47		—		—		—		—		—		82
that are credit impaired	—		119		—		—		—		—		—		119
Subordinated loan	—		—		6,163		—		—		—		—		6,163
that are not credit impaired	—		—		6,163		—		—		—		—		6,163
with significant increase in credit risk	—		—		—		—		—		—		—		—
that are credit impaired	—		—		—		—		—		—		—		—
Other	—		1,193		129		50		—		—		—		1,372
that are not credit impaired	—		1,185		129		50		—		—		—		1,364
with significant increase in credit risk	—		—		—		—		—		—		—		—
that are credit impaired	—		8		—		—		—		—		—		8
Total	$	562,604	$	486,923	$	430,727	$	30,602	$	—	$	—	$	—	$	1,510,856

The table below presents the Group's loan portfolio by credit quality classification as of March 31, 2024.


	Term Loans by Origination Fiscal Year
	2024		2023		2022		2021		2020		Prior		Revolving loans		Total
Mortgage loans	$	241,848	$	458,401	$	41,063	$	—	$	—	$	—	$	—	$	741,312
that are not credit impaired	240,974		454,933		40,784		—		—		—		—		736,691
with significant increase in credit risk	676		2,415		111		—		—		—		—		3,202
that are credit impaired	198		1,053		168		—		—		—		—		1,419
Car loans	196,305		66,403		—		—		—		—		—		262,708
that are not credit impaired	193,302		55,427		—		—		—		—		—		248,729
with significant increase in credit risk	1,590		2,232		—		—		—		—		—		3,822
that are credit impaired	1,413		8,744		—		—		—		—		—		10,157
Uncollateralized bank customer loans	210,612		34,568		8		—		—		—		—		245,188
that are not credit impaired	200,211		30,337		—		—		—		—		—		230,548
with significant increase in credit risk	4,715		1,072		—		—		—		—		—		5,787
that are credit impaired	5,686		3,159		8		—		—		—		—		8,853
Right of claim for purchased retail loans	130,291		15,694		167		—		—		—		—		146,152
that are not credit impaired	130,291		15,694		167		—		—		—		—		146,152
with significant increase in credit risk	—		—		—		—		—		—		—		—
that are credit impaired	—		—		—		—		—		—		—		—
Collateralized bank customer loans	21,972		327		—		—		—		—		—		22,299
that are not credit impaired	21,796		327		—		—		—		—		—		22,123
with significant increase in credit risk	89		—		—		—		—		—		—		89
that are credit impaired	87		—		—		—		—		—		—		87
Subordinated loan	—		5,037		—		—		—		—		—		5,037
that are not credit impaired	—		5,037		—		—		—		—		—		5,037
with significant increase in credit risk	—		—		—		—		—		—		—		—
that are credit impaired	—		—		—		—		—		—		—		—
Other	2,404		165		69		—		—		—		—		2,638
that are not credit impaired	2,395		165		69		—		—		—		—		2,629
with significant increase in credit risk	—		—		—		—		—		—		—		—
that are credit impaired	9		—		—		—		—		—		—		9
Total	$	803,432	$	580,595	$	41,307	$	—	$	—	$	—	$	—	$	1,425,334

Aging analysis of past due loans as of December 31, 2024 and March 31, 2024, is as follows:


	December 31, 2024
	Loans 30-59 Days past due		Loans 60-89 days past due		Loans 90 days or more past due and still accruing		Current loans		Total
Mortgage loans	$	1,515	$	973	$	2,558	$	804,562	$	809,608
Car loans	1,151		689		10,371		152,040		164,251
Uncollateralized bank customer loans	2,802		2,450		11,226		207,168		223,646
Right of claim for purchased retail loans	—		—		—		135,242		135,242
Collateralized bank customer loans	50		32		119		170,373		170,574
Subordinated loan	—		—		—		6,163		6,163
Other	—		—		8		1,364		1,372
Total	$	5,518	$	4,144	$	24,282	$	1,476,912	$	1,510,856


	March 31, 2024
	Loans 30-59 Days past due		Loans 60-89 days past due		Loans 90 days or more past due and still accruing		Current loans		Total
Mortgage loans	$	2,133	$	1,069	$	1,419	$	736,691	$	741,312
Car loans	2,167		1,655		10,157		248,729		262,708
Uncollateralized bank customer loans	3,576		2,211		8,853		230,548		245,188
Right of claim for purchased retail loans	—		—		—		146,152		146,152
Collateralized bank customer loans	—		89		87		22,123		22,299
Subordinated loan	—		—		—		5,037		5,037
Other	—		—		9		2,629		2,638
Total	$	7,876	$	5,024	$	20,525	$	1,391,909	$	1,425,334

The activity in the allowance for credit losses for the three months ended December 31, 2024 and 2023 is summarized in the following tables.


	Allowance for credit losses
	Mortgage loan		Uncollateralized bank customer loans		Collateralized bank customer loans		Car loans		Right of claim for purchased retail loans		Other		Total
March 31, 2024	$	(3,033)	$	(19,636)	$	(80)	$	(14,262)	$	(6,577)	$	(31)	$	(43,619)
Charges	(6,258)		(28,099)		(3,437)		(4,086)		(9,335)		(22)		(51,237)
Recoveries	1,089		5,257		53		5,506		5,216		—		17,121
Write off	—		12,838		4		2,713		—		32		15,587
Forex	560		2,852		153		1,927		59		—		5,551
December 31, 2024	$	(7,642)	$	(26,788)	$	(3,307)	$	(8,202)	$	(10,637)	$	(21)	$	(56,597)


	Allowance for credit losses
	Mortgage loan		Uncollateralized bank customer loans		Collateralized bank customer loans		Car loans		Right of claim for purchased retail loans		Other		Total
March 31, 2023	$	(554)	$	(233)	$	—	$	(758)	$	(1,247)	$	—	$	(2,792)
Adjustment to allowance for adoption of ASU 2016-13	(2,216)		(7,436)		(35)		(6,462)		(9,046)		—		(25,195)
Charges	(1,760)		(16,846)		(84)		(13,013)		(10,493)		(11,008)		(53,204)
Recoveries	1,782		9,826		58		7,096		15,617		—		34,379
Forex	17		16		1		17		87		—		138
December 31, 2023	$	(2,731)	$	(14,673)	$	(60)	$	(13,120)	$	(5,082)	$	(11,008)	$	(46,674)

Freedom Holding Corp. 10-Q