Quarterly report pursuant to Section 13 or 15(d)

LOANS ISSUED

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LOANS ISSUED
 3 Months Ended
Jun. 30, 2024
Loans and Leases Receivable Disclosure [Abstract]  
LOANS ISSUED LOANS ISSUED
Loans issued as of June 30, 2024, consisted of the following:
Amount Outstanding Due Dates Average Interest Rate Fair Value of
Collateral		 Loan Currency
 
Mortgage loans $ 724,295  July 2024 - June 2049 10.3% $ 724,294  KZT
Car loans 227,234  July 2024 - April 2032 23.9% 224,380  KZT
Uncollateralized bank customer loans 231,833  July 2024 - June 2044 27.7% —  KZT
Right of claim for purchased retail loans 134,333  July 2024 - August 2029 15.0% 134,333  KZT
Collateralized bank customer loans 29,102  July 2024 - July 2043 19.3% 27,982  KZT
Subordinated loan 5,038  December 2025 3.0% —  USD
Other 2,803  August 2024 - January 2029
18.6%/15.0%/2.5%
 33 
KZT/USD/EUR
Allowance for loans issued (40,086)
Total loans issued $ 1,314,552 
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 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 Group’s Consolidated Statements of Operations and Statements of Other Comprehensive Income. In accordance with the program and trust management agreement for the program, 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, 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 Group has determined that it 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 Group 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 June 30, 2024 and March 31, 2024, the corresponding liability amounted to $505,659 and $521,885, respectively.
As of June 30, 2024 and March 31, 2024, mortgage loans include loans under the state mortgage program "7-20-25" with an aggregate principal amount of $519,016 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, 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 June 30, 2024 and March 31, 2024, right of claims for purchased retail loans amounted to $134,333 and $146,152, respectively.

The total accrued interest for loans issued amounted to $8,277 as of June 30, 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 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 6 months for individuals and 12 months for legal entities restructured the contract due to the deterioration of the financial condition, the borrower is recognized as credit impaired, the presence of a sign of default, a sign of bankruptcy, the deterioration of the financial performance of the borrower, 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 June 30, 2024. Current vintage disclosure is the requirement due to first adoption of ASC 326.
Term Loans by Origination Year
2025 2024 2023 2022 2021 Prior Revolving loans Total
Mortgage loans $ 37,141  $ 223,214  $ 426,566  $ 37,374  $ —  $ —  $ —  $ 724,295 
that are not credit impaired 37,141  221,389  423,582  37,002  719,114 
with significant increase in credit risk —  1,322  1,627  298  3,247 
that are credit impaired —  503  1,357  74  1,934 
Car loans 661  170,230  56,343  —  —  —  —  227,234 
that are not credit impaired 661  165,792  45,318  211,771 
with significant increase in credit risk —  1,990  1,741  3,731 
that are credit impaired —  2,448  9,284  11,732 
Uncollateralized bank customer loans 18,126  183,176  30,524  7  —  —  —  231,833 
that are not credit impaired 18,058  168,030  25,547  —  211,635 
with significant increase in credit risk 68  4,559  1,030  —  5,657 
that are credit impaired —  10,587  3,947  7  14,541 
Right of claim for purchased retail loans 36,886  87,911  9,436  100  —  —  —  134,333 
that are not credit impaired 36,886  87,911  9,436  100  134,333 
with significant increase in credit risk —  —  —  —  — 
that are credit impaired —  —  —  —  — 
Collateralized bank customer loans 11,615  17,223  264  —  —  —  —  29,102 
that are not credit impaired 11,615  17,095  264  28,974 
with significant increase in credit risk —  128  —  128 
that are credit impaired —  —  —  — 
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 215  2,371  154  63  —  —  —  2,803 
that are not credit impaired 215  2,362  154  63  2,794 
with significant increase in credit risk —  —  —  —  — 
that are credit impaired —  9  —  —  9 
Total $ 104,644  $ 684,125  $ 528,325  $ 37,544  $ —  $ —  $ —  $ 1,354,638 
The table below presents the Group's loan portfolio by credit quality classification as of March 31, 2024.
Term Loans by Origination 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 June 30, 2024 and March 31, 2024, is as follows:
June 30, 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 $ 1,762  $ 1,485  $ 1,934  $ 719,114  $ 724,295 
Car loans 2,006  1,725  11,732  211,771  227,234 
Uncollateralized bank customer loans 3,021  2,636  14,541  211,635  231,833 
Right of claim for purchased retail loans —  —  —  134,333  134,333 
Collateralized bank customer loans 99  29  —  28,974  29,102 
Subordinated loan —  —  —  5,038  5,038 
Other —  —  9  2,794  2,803 
Total $ 6,888  $ 5,875  $ 28,216  $ 1,313,659  $ 1,354,638 
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 June 30, 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 (728) (6,389) (116) (1,526) (1,490) (6) (10,255)
Recoveries 295  3,733  20  3,938  3,473  11,459 
Write off —  —  4  109  —  —  113 
Forex 180  1,160  9  621  246  2,216 
June 30, 2024
 $ (3,286) $ (21,132) $ (163) $ (11,120) $ (4,348) $ (37) $ (40,086)
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 —  (7,755) (55) (2,948) (5,346) (3,261) (19,365)
Recoveries 284  1,602  8  272  3,345  —  5,511 
Forex 3  64  2  34  34  —  137 
June 30, 2023
 $ (2,483) $ (13,758) $ (80) $ (9,862) $ (12,260) $ (3,261) $ (41,704)