SoFi Technologies Inc
For the period ended Dec 31, 2024. Filed Feb 24, 2025.
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FY2024 · Filed Feb 24, 2025
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Provision for Credit Losses
| Year Ended December 31, · 2024 vs. 2023 · 2023 vs. 2022 | |||||||
|---|---|---|---|---|---|---|---|
| ($ in thousands) | 2024 | 2023 | 2022 | $ Change | % Change | $ Change | % Change |
| Credit Card | $31,599 | $54,267 | $53,030 | $(22,668) | (42)% | $1,237 | 2% |
| Commercial and consumer banking | 113 | 678 | 1,302 | (565) | (83)% | (624) | (48)% |
| Total | $31,712 | $54,945 | $54,332 | $(23,233) | (42)% | $613 | 1% |
2024 vs. 2023. The provision for credit losses was $31.7 million for the year-ended December 31, 2024, reflecting net charge-offs of $39.6 million and an allowance release of $8.0 million. Net charge-offs of $39.6 million decreased $1.4 million compared to the year ended December 31, 2023, driven by lower credit card charge-offs primarily due to improved delinquency rate (total credit card delinquency rate was 4.8%, down approximately 210 bps from the comparative period) as a result of tighter underwriting standards and risk mitigation actions. The allowance release of $8.0 million was also primarily related to our credit card products, reflecting improved credit quality of the portfolio, including higher borrower FICO scores. The prior year provision for the year ended December 31, 2023 was $54.9 million, reflecting net charge-offs of $41.0 million and an allowance increase of $13.3 million.
2023 vs. 2022. The provision for the year ended December 31, 2023 was $54.9 million and increase of $0.6 million from the prior year reflecting higher average credit card balances combined with elevated credit card loss rates during 2022.
Refer to “Analysis of Charge-offs”.
Analysis of Allowance for Credit Losses
Allowance for Credit Losses Ratios
The following table presents the ratio of allowance for credit losses to total loans outstanding that are measured at amortized cost:
| December 31, | ||
|---|---|---|
| ($ in thousands) | 2024 | 2023 |
| Allowance for credit losses to total loans outstanding | ||
| Allowance for credit losses | $46,684 | $54,695 |
| Total loans held for investment, at amortized cost outstanding(1) | $1,285,910 | $884,390 |
| Ratio(2) | 3.63% | 6.18% |
(1)Total loans outstanding excludes accrued interest.
(2)The decrease in the ratio was primarily attributable to secured loans, for which we did not recognize an allowance for credit losses, as well as a decrease in the allowance for credit losses related to credit card on improved delinquencies.
We omitted the credit ratios associated with nonaccrual loans, as the balance of nonaccrual loans was immaterial.
Allocation of Allowance for Credit Losses
The following table presents the allocation of the allowance for credit losses and the percentage of loans outstanding by category to total loans outstanding that are measured at amortized cost:
| December 31, 2024 | December 31, 2023 | |||
|---|---|---|---|---|
| ($ in thousands) | Allowance for credit losses | Percent of loans to total loans(1) | Allowance for credit losses | Percent of loans to total loans(1) |
| Credit card | $44,350 | 26% | $52,385 | 36% |
| Commercial and consumer banking | 2,334 | 12% | 2,310 | 13% |
| Secured loans(2) | — | 62% | — | 51% |
| Total | $46,684 | 100% | $54,695 | 100% |
(1)Loans outstanding balances used in the calculation exclude accrued interest.
(2)Secured loans are term loan arrangements secured by underlying loans (collateral) owned by the debtor. The underlying loans were previously originated by us and were subject to our underwriting process and risk models, prior to being sold to the debtor and in most instances these loans continue to be serviced by us. We evaluate the credit quality of our secured loan portfolio relative to the fair value of the underlying collateral, reassessing it quarterly based on relevant information, including funded loan rates and historical loss experience. An allowance for credit losses is required when there is an expected credit loss after considering the fair value of the collateral as well as any anticipated future changes in the underlying collateral. As of December 31, 2024, based on this evaluation we did not recognize an allowance for credit losses on our secured loans.
Analysis of Charge-offs
The following tables present information regarding average loans outstanding, net charge-offs and the annualized ratio of net charge-offs to average loans outstanding:
| Year Ended December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2024 · 2023 · 2022 | |||||||||
| ($ in thousands) | Average Loans(1) | Net Charge-offs(2)(3)(4) | Ratio(4)(5) | Average Loans(1) | Net Charge-offs(2)(3) | Ratio(5) | Average Loans(1) | Net Charge-offs(2)(3) | Ratio(5) |
| Personal loans | $16,426,053 | $581,370 | 3.54% | $12,638,807 | $432,706 | 3.42% | $4,767,708 | $88,511 | 1.86% |
| Student loans | 7,414,829 | 47,097 | 0.64% | 5,641,787 | 25,048 | 0.44% | 4,059,001 | 12,677 | 0.31% |
| Home loans | 77,912 | — | —% | 78,554 | — | —% | 132,663 | — | —% |
| Secured loans | 1,024,275 | — | —% | 26,291 | — | —% | — | — | —% |
| Credit card | 274,093 | 39,634 | 14.46% | 238,832 | 40,992 | 17.16% | 167,290 | 20,957 | 12.53% |
| Commercial and consumer banking | 142,905 | 89 | 0.06% | 109,541 | 46 | 0.04% | 73,361 | 7 | 0.01% |
| Total loans | $25,360,067 | $668,190 | 2.63% | $18,733,812 | $498,792 | 2.66% | $9,200,023 | $122,152 | 1.33% |
(1)Average balances were calculated on daily carrying balances for the 2024 and 2023 periods, and on thirteen-month ending carrying balances for the 2022 period, as the daily analysis in the prior periods would have involved undue burden. Both average calculations are representative of our operations.
(2)Net charge-offs include both credit- and certain non-credit-related charge-offs. Non-credit related charge-offs, which primarily relate to alleged or potential fraud, occur occasionally in our business and are impacted by factors different from our credit related charge-offs. Non-credit related charge-offs were immaterial for all periods presented.
(3)Net charge-offs related to personal, student and home loans are generally recorded innoninterest income—loan origination, sales, and securitizations as part of the respective loans total change in fair value. Net charge-offs related to credit card and commercial and consumer banking are considered as part of theallowance for credit losses andprovision for credit losses.
(4)Excludes the impact of delinquent personal loan sales during the year ended December 31, 2024 . These loans were sold prior to charge-off during the year ended December 31, 2024 and otherwise would have been charged off as of December 31, 2024 consistent with our policy. See Note 4. Loans to the Notes to Consolidated Financial Statements for additional information.
(5)Net charge-off ratio is calculated as net charge-offs divided by average loans.
2024 vs. 2023. For the year ended December 31, 2024, the total net charge-off ratio was 2.63%, a decrease of 3 bps compared with the year ended December 31, 2023, and total net charge-offs were $668.2 million, an increase of $169.4 million over the comparable period. The decrease in the total net charge-off ratio was primarily due to a lower credit card net charge-off ratio reflective of improvement in delinquency rates (total credit card delinquency rate was 4.8%, down approximately 210 bps from the comparative period) as a result of tighter underwriting standards and risk mitigation actions, as well as an increase of $359.1 million in secured loans, for which we did not recognize an allowance for credit losses. The increase in total net charge-offs was primarily driven by higher personal loan amounts of $148.7 million and higher student loan amounts of $22.0 million. In addition, charge-off ratios for personal loans and student loans were higher year over year, by 12 bps and 20 bps, respectively, which partially offset the improvement in the total net charge-off ratio. These increases reflect growth in our portfolios, seasoning of vintages and credit normalization, along with the impact of the end of the student loan payment moratorium on August 30, 2023.
2023 vs. 2022. For the year ended December 31, 2023, the total net charge-off ratio was 2.66%, an increase of 133 bps compared with the year ended December 31, 2022, and total net charge-offs were $498.8 million, an increase of $376.6 million over the comparable period. The increase in the net charge-off rate and net charge-offs related to credit card was primarily related to our maturing portfolio, and personal loans on growth in our portfolio, seasoning of vintages and credit normalization.
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