Quarterly report pursuant to Section 13 or 15(d)

LOANS ISSUED

v3.24.0.1
LOANS ISSUED
 9 Months Ended
Dec. 31, 2023
Loans and Leases Receivable Disclosure [Abstract]  
LOANS ISSUED LOANS ISSUED
Loans issued as of December 31, 2023, consisted of the following:
Amount Outstanding Due Dates
Weighted Average Interest Rate
Fair Value of Collateral Loan Currency
Mortgage loans 693,167 
February, 2024 - December, 2048
 10.30% 692,016  KZT
Car loans 274,980 
January, 2024 - December, 2030
 23.70% 264,953  KZT
Uncollateralized bank customer loans 243,029 
January, 2024- December, 2043
 27.10% —  KZT
Right of claim for purchased retail loans 142,970 
January, 2024 - December, 2028
 15.00% 142,970  KZT
Collateralized bank customer loans 21,104 
January, 2024 - July, 2043
 20.97% 20,748  KZT
Subordinated loan 5,038  December, 2025 3.00% —  USD
Other 12,391 
January, 2024 - September, 2029
9.10%/3%/16%/2.4%
 24  UAH/USD/KZT/EUR
Allowance for loans issued (46,674)
Total loans issued $ 1,346,005 
The Group provides mortgage loans to borrowers on behalf of the JSC Kazakhstan Sustainability Fund ("Program Operator") related to the state mortgage program "7-20-25" and transfers the rights of claim on the loans to the Program Operator. Under this program, borrowers can receive a mortgage at an interest rate of 7%, for 20 years. In accordance with the program and trust management agreement, the Group carries out trust management of transferred mortgage loans, and transfers all repayments of principal amounts of mortgages plus 4% of the 7% interest to the Program Operator. The remaining 3% of the 7% interest is retained by the Group as profit margin. Under the program and trust management agreement, the Group is required to repurchase the rights of claims on transferred mortgage loans, when the loan principal amount and interest payments are overdue 90 days or more. The repurchase of delinquent loans is performed at the loan nominal value.

Since the Group transfers the right of claim with recourse for uncollectible amounts, retains part of interest from those loans, and agrees to service those loans after the sale, the Group has determined that it retains control over the mortgage loans transferred and continues recognizing the loans. As the Group continues to recognize the loans, it also recognizes the associated liability in the amount of $494,513 as of December 31, 2023, which is presented separately as liability arising from continuing involvement in the Condensed Consolidated Balance Sheets. As of March 31, 2023 the corresponding liability amounted to $440,805.
As of December 31, 2023 and March 31, 2023, mortgage loans include loans under the state mortgage program "7-20-25" with an aggregate principal amount of $506,150 and $463,114, respectively.

The Group has an agreement with FFIN Credit, a company established and controlled by FRHC's controlling shareholder, chairman and chief executive officer, Timur Turlov, to purchase uncollateralized retail loans. 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 launch, it is anticipated that the ownership of FFIN Credit will be sold by Mr. Turlov to the Company. The bank has legal ownership over purchase from FFIN Credit uncollateralized retail loans, however, in accordance with U.S. GAAP requirements, 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 presented on the consolidated balance sheets within the loans issued. As of December 31, 2023 and March 31, 2023, right of claims for purchased retail loans in the amount of $142,970 and $121,177, respectively.

The total accrued interest for loans issued amounted $7,942 as of December 31, 2023 and $3,548 as of March 31, 2023.
Loans issued as of March 31, 2023, consisted of the following:
Amount Outstanding Due Dates
Weighted Average Interest Rate
Fair Value of Collateral Loan Currency
Mortgage loans $ 534,154  April, 2023 - March, 2048 9.00  % 534,154  KZT
Right of claims for purchased retail loans 121,177  January, 2023 - March, 2027 15.00  % 121,177  KZT
Car loans 102,269  April, 2023- April, 2030 25.00  % 102,247  KZT
Uncollateralized bank customer loans 46,970  January, 2023 - March, 2043 25.00  % —  KZT
Collateralized bank customer loans 17,653  May, 2023 - March, 2028 2.00  % 17,636  KZT/RUB
Subordinated loan 5,039  December, 2025 3.00  % —  USD
Loans to policyholders 1,488  June, 2023 - February, 2024 15.00  % 1,752  KZT
Other 300  March, 2024-September, 2029 2.00  % — EUR
Allowance for loans issued (2,792)
Total loans issued $ 826,258 
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 presence of overdue debt on principal and interest for a period of more than 30 days or the absolute probability of default threshold PD exceeds 20%. Agreements classified as “credit impaired” represent loans for which at the reporting date there are signs of impairment, the borrower has been in default for 90 or more days for individuals and 60 or more days for legal entities, the borrower for the last 12 months restructured the contract due to the
deterioration of the financial condition, the presence of a sign of default, a sign of bankruptcy, the deterioration of the financial performance of the borrower, a significant deterioration in the quality and cost of collateral, the presence of other information indicating the presence 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, 2023. Current vintage disclosure is the requirement due to first adoption of ASC 326.
Term Loans by Origination Year
2024 2023 2022 2021 2020 Prior Revolving loans Total
Mortgage loans 192,157  459,089  41,921  —  —  —  —  693,167 
that are not credit impaired 192,021  457,138  41,687  —  —  —  —  690,846 
with significant increase in credit risk 108  1,333  138  —  —  —  —  1,579 
that are credit impaired 28  618  96  —  —  —  —  742 
Car loans 202,591  72,389  —  —  —  —  —  274,980 
that are not credit impaired 200,842  62,915  —  —  —  —  —  263,757 
with significant increase in credit risk 942  2,122  —  —  —  —  —  3,064 
that are credit impaired 807  7,352  —  —  —  —  —  8,159 
Uncollateralized bank customer loans 206,378  36,643  8  —  —  —  —  243,029 
that are not credit impaired 201,802  33,768  —  —  —  —  —  235,570 
with significant increase in credit risk 2,873  1,030  —  —  —  —  —  3,903 
that are credit impaired 1,703  1,845  8  —  —  —  —  3,556 
Right of claim for purchased retail loans 117,226  25,361  383  —  —  —  —  142,970 
that are not credit impaired 117,199  25,359  383  —  —  —  —  142,941 
with significant increase in credit risk 27  2  —  —  —  —  —  29 
that are credit impaired —  —  —  —  —  —  —  — 
Collateralized bank customer loans 20,760  344  —  —  —  —  —  21,104 
that are not credit impaired 20,657  344  —  —  —  —  —  21,001 
with significant increase in credit risk 40  —  —  —  —  —  —  40 
that are credit impaired 63  —  —  —  —  —  —  63 
Subordinated loan —  5,038  —  —  —  —  —  5,038 
that are not credit impaired —  5,038  —  —  —  —  —  5,038 
with significant increase in credit risk —  —  —  —  —  —  —  — 
that are credit impaired —  —  —  —  —  —  —  — 
Other 8,078  1,337  —  —  2,976  —  —  12,391 
that are not credit impaired 1,290  116  —  —  —  —  —  1,406 
with significant increase in credit risk —  —  —  —  —  —  —  — 
that are credit impaired 6,788  1,221  —  —  2,976  —  —  10,985 
Total 747,190  600,201  42,312  —  2,976  —  —  1,392,679 
The table below presents the Group's loan portfolio by credit quality classification as of March 31, 2023.
March 31, 2023
That are not credit impaired With significant increase in credit risk That are credit impaired Total
Mortgage loans $ 532,621  $ 1,505  $ 28  $ 534,154 
Right of claim for purchased retail loans 121,055  122  —  121,177 
Car loans 102,269  —  —  102,269 
Uncollateralized Bank customer loans 46,882  81  7  46,970 
Collateralized Bank customer loans 17,653  —  —  17,653 
Subordinated loan 5,039  —  —  5,039 
Loans issued to policyholders 1,488  —  —  1,488 
Other 300  —  —  300 
Total loans $ 827,307  $ 1,708  $ 35  $ 829,050 

Aging analysis of past due loans as of December 31, 2023 and March 31, 2023, is as follows:
December 31, 2023
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 1,151  428  742  690,846  693,167 
Car loans 1,862  1,202  8,159  263,757  274,980 
Uncollateralized bank customer loans 2,100  1,803  3,556  235,570  243,029 
Right of claim for purchased retail loans 29  —  —  142,941  142,970 
Collateralized bank customer loans 40  —  63  21,001  21,104 
Subordinated loan —  —  —  5,038  5,038 
Other —  —  10,985  1,406  12,391 
Total 5,182  3,433  23,505  1,360,559  1,392,679 
March 31, 2023
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 $ 1,265  $ 240  $ 28  $ 532,621  $ 534,154 
Right of claim for purchased retail loans 123  —  —  121,054  121,177 
Car loans —  —  —  102,269  102,269 
Uncollateralized Bank customer loans 73  8  7  46,882  46,970 
Collateralized Bank customer loans —  —  —  17,653  17,653 
Subordinated loan —  —  —  5,039  5,039 
Loans issued to policyholders —  —  —  1,488  1,488 
Other —  —  —  300  300 
Total $ 1,461  $ 248  $ 35  $ 827,306  $ 829,050 
The activity in the allowance for credit losses as of December 31, 2023 and December 31, 2022 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, 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 
Foreign currency translation difference
 17  16  1  17  87  —  138 
December 31, 2023
 (2,731) (14,673) (60) (13,120) (5,082) (11,008) (46,674)
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
April 1, 2022 (305) (16) —  —  (1,308) —  (1,629)
Charges (2,816) (79) (15) (2,559) (11,301) —  (16,770)
Recoveries 709  23  8  36  3,295  —  4,071 
Foreign currency translation difference
 (80) (1) (1) (78) (223) —  (383)
December 31, 2022
 $ (2,492) $ (73) $ (8) $ (2,601) $ (9,537) $ —  $ (14,711)