SoFi Technologies Inc

In the table below, we present certain metrics related to our Lending segment:

(1)Loans with a balance and average loan balance include loans on our balance sheet, as well as transferred loans and referred loans with which we have a continuing involvement through our servicing agreements.

(2)In-school loans carry a lower average balance than student loan refinancing products.

Total Products

Total products in our Lending segment is a subset of our total products metric. See “Key Business Metrics” for further discussion of this measure as it relates to our Lending segment.

Origination Volume

We refer to the aggregate dollar amount of loans originated through our platform in a given period as origination volume. Origination volume is an indicator of the size and health of our Lending segment and an indicator (together with the relevant loan characteristics, such as interest rate and prepayment and default expectations) of revenues and profitability. Changes in origination volume are driven by the addition of new members and existing members, the latter of which at times will either refinance into a new SoFi loan or secure an additional, concurrent loan, as well as macroeconomic factors impacting consumer spending and borrowing behavior. Since the profitability of the Lending segment is largely correlated with origination volume, management relies on origination volume trends to assess the need for external financing to support the Financial Services segment and the expense budgets for unallocated expenses.

Personal Loans. During the three months ended March 31, 2024, personal loan origination volume increased relative to the corresponding 2023 period, primarily due to increased demand driven by expanded marketing efforts and increased demand for debt consolidation products in a rising interest rate environment during 2023 that has persisted into 2024.

Student Loans. During the three months ended March 31, 2024, student loan origination volume increased relative to the corresponding 2023 period, as demand for student loan refinancing products increased after the resumption of principal and interest payments on federally-held student loans as borrowers looked to refinance at a lower rate or, given the high interest rate environment, to extend the loan term. Demand for student loan refinancing products during the prior year was affected by the unfavorable impact of the suspension of principal and interest payments on federally-held student loans through August 30, 2023 and the expectation of debt cancellation for certain federal student loan borrowers which was struck down by the U.S. Supreme Court in June 2023, combined with a continued rising interest rate environment in 2023.

Home Loans. During the three months ended March 31, 2024, home loan origination volume increased significantly relative to the corresponding 2023 period. Our home loan origination volume increased notably beginning in the second quarter of 2023, aided by the increased capacity and capabilities subsequent to our acquisition of Wyndham. This was partially offset by rising interest rates through 2023, which tends to lower demand for home loans overall and shift demand from refinance originations to purchase originations, the latter of which is a more competitive landscape. Although purchase originations historically represented a smaller percentage of our home loan originations, our mix has continued to shift toward more purchase originations, which we would expect to continue under similar macroeconomic conditions.

Loans with a Balance and Average Loan Balance

Loans with a balance refers to the number of loans that have a balance greater than zero dollars as of the reporting date. Loans with a balance allows management to better understand the unit economics of acquiring a loan in relation to the lifetime value of that loan. Average loan balance is defined as the total unpaid principal balance of the loans divided by loans with a balance within the respective loan product category as of the reporting date. Average loan balance tends to fluctuate based on the pace of loan originations relative to loan repayments and the initial loan origination size.

In the table below, we present additional information related to our lending products:

(1)Weighted average interest rate earned represents annualized interest income recognized divided by the average of the unpaid principal balances of loans outstanding during the period, which are impacted by loan holding periods as well as interest rates charged to borrowers. Weighted average interest rate earned was determined on a daily basis for the 2024 period and on a four-month basis for the 2023 period, as the daily analysis in the prior period would have involved undue burden. Both average calculations are representative of our operations.

Lending Segment Results of Operations

The following table presents the measure of contribution profit for the Lending segment:

(1)Reflects changes in fair value inputs and assumptions, including market servicing costs, conditional prepayment, default rates and discount rates. This non-cash change, which is recorded within noninterest income in the condensed consolidated statements of operations and comprehensive loss, is unrealized during the period and, therefore, has no impact on our cash flows from operations. As such, the changes in fair value attributable to assumption changes are adjusted to provide management and financial users with better visibility into the cash flows available to finance our operations.

(2)Reflects changes in fair value inputs and assumptions, including conditional prepayment, default rates and discount rates. When third parties finance our consolidated VIEs through purchasing residual interests, we receive proceeds at the time of the securitization close and, thereafter, pass along contractual cash flows to the residual interest owner. These obligations are measured at fair value on a recurring basis, with fair value changes recorded within noninterest income in the condensed consolidated statements of operations and comprehensive loss. The fair value change attributable to assumption changes has no impact on our initial financing proceeds, our future obligations to the residual interest owner (because future residual interest claims are limited to contractual securitization collateral cash flows), or the general operations of our business. As such, this non-cash change in fair value is adjusted to provide management and financial users with better visibility into the cash flows available to finance our operations.

(3)Adjusted net revenue is a non-GAAP financial measure. For information regarding our use and definition of this measure and for a reconciliation to the most directly comparable U.S. GAAP measure, total net revenue, see “Non-GAAP Financial Measures” herein.

Net interest income in our Lending segment increased by $65.5 million, or 33%, for the three months ended March 31, 2024 compared to the same period in 2023, which was primarily attributable to increases in average personal loan unpaid principal balances of $6.1 billion (73%) and in average student loan unpaid principal balances of $1.8 billion (39%), combined with a higher weighted average interest rate. The personal and student loan average balance increases were primarily attributable to higher origination volume and longer loan holding periods. Interest expense associated with funding our lending activities increased by $193.0 million, or 130%, for the three-month year over year period, primarily due to the sharp increases in benchmark rates which are reflective of the higher interest rate environment during 2023 as well as higher average loan balances.

Noninterest income in our Lending segment decreased by $72.1 million, or 53%, for the three months ended March 31, 2024 compared to the same period in 2023, which was primarily driven by lower loan origination, sales, and securitizations income of $66.3 million.

Loan Origination, Sales, and Securitizations

The following table presents the components of noninterest income—loan origination, sales, and securitizations:

(1)Includes fair value adjustments on loans originated during the period, fair value adjustments of loans and securitization bond and residual interest positions held at the balance sheet date, as well as gains (losses) on loans sold and consolidated securitization transactions during the period. Fair value adjustments are impacted by interest rates, weighted average coupon, credit spreads and loss estimates, prepayment speeds, duration and previous loan sale execution on similar loans.

(2)Includes IRLCs and interest rate caps, as well as purchase price earn-out during the 2023 period.

(3)For the three months ended March 31, 2024 and 2023, includes gross write-offs of $175.5 million and $86.7 million, respectively. Total recoveries were $30.8 million and $13.9 million, respectively, of which $25.0 million and $6.9 million, respectively, were captured via loan sales to a third-party collection agency.

(4)Represents the (expense) benefit associated with our estimated loan repurchase obligation. See Note 15. Commitments, Guarantees, Concentrations and Contingencies to the Notes to Condensed Consolidated Financial Statements for additional information.

The decrease in loan origination, sales, and securitizations income was primarily driven by: (i) fair value losses on personal loans in the 2024 period compared to gains during the 2023 period, which were primarily impacted by higher prepayment rate, discount rate and default rate assumptions, and lower fair value gains on student loans in the 2024 period, which were primarily impacted by higher unpaid principal balance, and (ii) higher personal loan write-offs in the 2024 period, primarily driven by longer loan holding periods and elevated charge off rates. These decreases were partially offset by: (i) gains in the 2024 period compared to losses in the 2023 period on student loan, personal loan and risk retention interest rate swap positions primarily driven by increases in interest rates during the 2024 period compared to decreases in interest rates during the 2023 period, and (ii) higher origination fees primarily related to a product feature offered on personal loans, whereby a borrower may optionally elect to pay origination fees to qualify for a lower annual percentage rate.

Servicing

We own the master servicing on all of the servicing rights that we retain and, in each case, recognize the gross servicing rate applicable to each serviced loan. Sub-servicers are utilized for all serviced student loans and home loans, which represents a cost to SoFi, but these arrangements do not impact our calculation of the weighted average basis points earned for each loan type serviced. Further, there is no impact on servicing income due to forbearance and moratoriums on certain debt collection activities, and there are no waivers of late fees. The table below presents information related to our loan servicing activities:

Directly attributable expenses

The directly attributable expenses allocated to the Lending segment that were used in the determination of the segment's contribution profit were as follows:

(1)Other expenses primarily include loan marketing expenses, member promotional expenses, tools and subscriptions, travel and occupancy-related costs and third-party loan fraud (net of related insurance recoveries).

Lending segment directly attributable expenses for the three months ended March 31, 2024 increased by $2.4 million, or 2%, compared to the same period in 2023, primarily due to: (i) an increase in student and personal loan lead generation channels during 2024, and (ii) an increase in allocated compensation and related benefits, which reflected increases in average compensation and average headcount in 2024. This increase was partially offset by: (i) a decline in other expenses, primarily related to third-party loan fraud and tools and subscriptions, and (ii) a decrease in direct advertising primarily related to direct mail advertising.

Transfers of Financial Assets

We regularly transfer financial assets and account for such transfers as either sales or secured borrowings depending on the facts and circumstances of the transfer. The following table summarizes our current whole loan sales:

(1)Sale execution represents the ratio of cash proceeds and servicing assets recognized to the aggregate unpaid principal balance and accrued interest of the loans sold. Amounts included in repurchase liabilities are excluded from the calculation, as they typically would not materially differ from the fair value markdown on the loans over the repurchase period had they been held on balance sheet and entered delinquency.

The following table summarizes our delinquent whole loan sales during the three months ended March 31, 2024. There were no delinquent whole loan sales during the three months ended March 31, 2023.

(1)Includes $62.5 million of aggregate unpaid principal balance sold, related to late-stage delinquent loans for which we retained servicing and portions of recoveries. $43.2 million of the $62.5 million of unpaid principal balance was recorded in prior periods as a write down innoninterest income—loan origination, sales, and securitizations in the condensed consolidated statements of operations and comprehensive income (loss). These loans were sold prior to charge-off during the three months ended March 31, 2024, and otherwise would have been charged off as of March 31, 2024 consistent with our policy. In our other charged off whole loan sales, we typically do not retain servicing or recoveries.

(2)Sale execution represents the ratio of cash proceeds and servicing assets recognized to the aggregate unpaid principal balance and accrued interest of the loans sold. Amounts included in repurchase liabilities are excluded from the calculation, as they typically would not materially differ from the fair value markdown on the loans over the repurchase period had they been held on balance sheet and entered delinquency.