SoFi Technologies Inc

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

(1)Inclusive of origination volume related to our Loan Platform Business. For the three and nine months ended September 30, 2024, we originated $1.0 billion of personal loans on behalf of third parties. We did not originate any loans on behalf of third parties during the 2023 periods presented.

(2)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.

(3)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” and “Business Overview” 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. We also originate and sell loans in support of our Loan Platform Business, through which we provide lending related services to third-party partners. We maintain the same lending relationship with borrowers across all loans that we originate, inclusive of those originated on behalf of a third-party partner and as such, reflect these products within our Lending segment total products. 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 and nine months ended September 30, 2024, total personal loan origination volume increased by 26% and 17%, respectively, relative to the corresponding 2023 periods, inclusive of a $1.0 billion increase related to personal loans originated on behalf of third parties during the third quarter of 2024 in support of our Loan Platform Business. Overall increases in origination volume were 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 remained elevated through the third quarter of 2024.

Student Loans. During the three and nine months ended September 30, 2024, student loan origination volume increased by 3% and 32%, respectively, relative to the corresponding 2023 periods, 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 and nine months ended September 30, 2024, home loan origination volume increased by 38% and 80%, respectively, relative to the corresponding 2023 periods. Our home loan origination volume increased notably beginning in the second quarter of 2023 and throughout 2024, aided by the increased capacity and capabilities subsequent to our acquisition of Wyndham. In addition, interest rates began to decline in the third quarter of 2024, which tends to raise demand for home loans overall as well as shift demand towards refinance originations from purchase originations.

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)Inclusive of activity related to loans originated and subsequently sold as part of our Loan Platform Business. For the three and nine months ended September 30, 2024, included $1.0 billion related to loans originated on behalf of third parties. We did not originate any loans on behalf of third parties during the 2023 periods presented.

(2)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.

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 on servicing rights, including conditional prepayment, default rates and discount rates. These assumptions are highly sensitive to market interest rate changes and are not indicative of our performance or results of operations. These non-cash charges, which are recorded within noninterest income in the condensed consolidated statements of operations and comprehensive income (loss), are unrealized during the period and, therefore, have no impact on our cash flows from operations.

(2)Reflects changes in fair value inputs and assumptions on residual interests classified as debt, including conditional prepayment, default rates and discount rates. When third parties finance our consolidated securitization VIEs by purchasing residual interests, we receive proceeds at the time of the closing of the securitization 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 income (loss). These residual debt obligations are measured at fair value on a recurring basis, but they have 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.

(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 $51.1 million, or 19%, and by $163.9 million, or 23%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. This was primarily attributable to (i) increases in aggregate average personal loan unpaid principal balances of $2.5 billion (19%) and $4.1 billion (37%), respectively, combined with higher weighted average interest rates for the nine month period, and partially offset by lower weighted average interest rates for the three month period, and (ii) increases in aggregate average student loan unpaid principal balances of $1.6 billion (29%) and $1.6 billion (31%), respectively, combined with a higher weighted average interest rate for both periods. 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 $81.0 million, or 31%, and $402.3 million, or 66%, for the three and nine-month year over year periods, respectively, primarily due to higher average loan balances as well as the sharp increases in benchmark rates which are reflective of the higher interest rate environment during 2023 and persisting in 2024.

Noninterest income in our Lending segment decreased by $3.8 million, or 5%, and decreased by $113.9 million, or 36%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in 2023. For the three and nine month periods, the decrease was primarily attributable to lower loan origination, sales, and securitizations income of $5.3 million and $106.9 million, respectively.

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 gains (losses) on IRLCs and interest rate caps. Also includes gains (losses) related to credit derivatives for the 2024 periods, as well as gains (losses) on purchase price earn-out during the nine month 2023 period.

(3)For the three months ended September 30, 2024 and 2023, includes gross write-offs of $182.8 million and $145.7 million, respectively. Total recoveries were $22.9 million and $19.9 million, respectively, of which $17.1 million and $14.1 million, respectively, were captured via loan sales to a third-party collection agency. For the nine months ended September 30, 2024 and 2023, includes gross write-offs of $545.9 million and $342.9 million, respectively. Total recoveries were $78.4 million and $51.2 million, respectively, of which $60.9 million and $32.5 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.

Three Months. The decrease in loan origination, sales, and securitizations income of $5.3 million was primarily driven by: (i) losses in the 2024 period compared to gains in the 2023 period on student loan, personal loan and risk retention interest rate swap positions due to decreases in interest rates during the 2024 period compared to increases during the 2023 period ($342.7 million); and (ii) higher personal and student loan write-offs in the 2024 period, primarily driven by longer loan holding periods and elevated charge off rates ($34.1 million). These decreases were partially offset by: (i) fair value gains on student loans in the 2024 period compared to losses during the 2023 period which were primarily impacted by higher aggregate average unpaid principal balance ($169.0 million); (ii) higher fair value gains on personal loans which were primarily impacted by lower discount rate assumptions as well as higher aggregate average unpaid principal balance ($159.9 million); and (iii) 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 ($42.1 million).

Nine Months. The decrease in loan origination, sales, and securitizations income of $106.9 million was primarily driven by: (i) higher personal loan as well as student loan write-offs in the 2024 period, primarily driven by longer loan holding periods and elevated charge off rates ($175.8 million); (ii) lower gains on student loan, personal loan and risk retention interest rate swap positions primarily driven by larger increases in interest rates in the 2023 period compared to mixed rate movement during the 2024 period ($154.6 million); and (iii) lower fair value gains on personal loans, which were primarily impacted by higher prepayment rate assumptions ($107.3 million). These decreases were partially offset by: (i) 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 ($196.7 million); and (ii) higher fair value gains on student loans, which were primarily impacted by lower discount rate assumptions and higher aggregate average unpaid principal balance ($147.4 million).

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:

(1)Increases during the 2024 periods were primarily attributable to higher loan sales.

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 and nine months ended September 30, 2024 increased by $14.4 million, or 10%, and $19.0 million, or 5%, respectively, compared to the same periods in 2023, primarily due to: (i) an increase in direct advertising primarily related to online and digital advertising, partially offset by decreases in direct mail advertising, (ii) an increase in student and personal loan lead generation channels, (iii) an increase in allocated compensation and related benefits, which reflected increases in average compensation in 2024, and (iv) a decline in other expenses, primarily related to third-party loan fraud and tools and subscriptions.

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.

(2)Sales execution excludes net origination fees (costs), which are recognized in earnings at the time of origination. Personal loans sold during the three and nine months of 2024 had related net origination fees (costs) of $8.7 million and $26.8 million, respectively. Sales execution, for the respective periods, including these net origination fees (costs) would be 108.2% and 107.6%. Personal loans sold during the three and nine months of 2023 had related origination (costs) of $(0.02) million and $(0.09) million, respectively, and no origination fees for either period. Sales execution, for the respective periods, including these origination (costs) would be 104.9% and 104.1%, respectively.

The following table summarizes our delinquent whole loan sales during the three and nine months ended September 30, 2024. There were no delinquent whole loan sales during the three and nine months ended September 30, 2023.

(1)During the three and nine months ended September 30, 2024, includes $81.0 million and $212.9 million, respectively, of aggregate unpaid principal balance sold, related to late-stage delinquent loans for which we retained servicing and portions of recoveries. For the three and nine months ended September 30, 2024, $50.3 million and $140.6 million, respectively, 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 and nine months ended September 30, 2024, and otherwise would have been charged off as of September 30, 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.

In addition to the previously disclosed personal, student and home loan sale activity, we also sold a secured loan at par during the three and nine months ended September 30, 2024, which had an aggregate unpaid principal balance and accrued interest of $312.5 million.