SoFi Technologies(SOFI) - 2024 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements This section presents SoFi's unaudited condensed consolidated financial statements, detailing a significant increase in total assets and a shift to net income for the period ended September 30, 2024 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands of USD) | Account | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Total Assets | $34,380,176 | $30,074,858 | | Cash and cash equivalents | $2,354,965 | $3,085,020 | | Total Loans (HFS & HFI) | $26,618,443 | $22,958,414 | | Goodwill | $1,393,505 | $1,393,505 | | Total Liabilities | $28,258,695 | $24,519,872 | | Total Deposits | $24,407,786 | $18,620,663 | | Debt | $3,180,205 | $5,233,416 | | Total Permanent Equity | $6,121,481 | $5,234,612 | - Total assets of consolidated Variable Interest Entities (VIEs) decreased significantly to $341.8 million as of September 30, 2024, from $774.8 million as of December 31, 2023, primarily due to a reduction in loans held for sale within these entities[17] Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Statement of Operations Highlights (in thousands of USD, except per share data) | Metric | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Total Net Revenue | $697,121 | $537,209 | $1,940,734 | $1,507,385 | | Net Income (Loss) | $60,745 | $(266,684) | $166,192 | $(348,655) | | Diluted EPS | $0.05 | $(0.29) | $0.08 | $(0.40) | - The company shifted from a significant net loss in Q3 2023 to a net income in Q3 2024, driven by a 30% increase in total net revenue and a substantial reduction in noninterest expenses, notably the absence of a goodwill impairment charge that was present in the prior year[19] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Nine Months Ended September 30 (in thousands of USD) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(919,704) | $(6,979,198) | | Net cash used in investing activities | $(3,540,106) | $(476,335) | | Net cash provided by financing activities | $3,813,743 | $8,906,046 | - Financing activities were a major source of cash, primarily driven by a $5.65 billion net increase in deposits, partially offset by a $1.91 billion net decrease in debt facilities, with prior year financing activities even higher due to an $8.30 billion increase in deposits[26] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations for the financial statements, covering significant accounting policies, loan and deposit compositions, debt, equity, and segment performance - SoFi operates through three reportable segments: Lending, Technology Platform, and Financial Services, having expanded through strategic acquisitions including Galileo, Golden Pacific Bancorp, Technisys, and Wyndham Capital Mortgage[28] Loan Portfolio Composition (in thousands of USD) | Loan Category | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Loans held for sale, at fair value | $17,324,514 | $15,396,771 | | Personal loans | $17,242,824 | $15,330,573 | | Home loans | $81,690 | $66,198 | | Loans held for investment | $9,293,929 | $7,561,643 | | Student loans (at fair value) | $7,876,667 | $6,725,484 | | At amortized cost | $1,417,262 | $836,159 | | Total Loans | $26,618,443 | $22,958,414 | Deposit Composition (in thousands of USD) | Deposit Type | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Savings deposits | $20,515,821 | $12,902,033 | | Demand deposits | $2,402,196 | $2,663,335 | | Time deposits | $1,433,761 | $3,003,625 | | Total interest-bearing deposits | $24,351,778 | $18,568,993 | | Noninterest-bearing deposits | $56,008 | $51,670 | | Total deposits | $24,407,786 | $18,620,663 | - In March 2024, the company issued $862.5 million of 1.25% convertible senior notes due 2029 and repurchased $684.0 million of its 0% convertible senior notes due 2026, resulting in a net gain on extinguishment of $62.5 million for the nine-month period[35][110][112] Segment Contribution Profit (in thousands of USD) | Segment | Q3 2024 | Q3 2023 | Nine Months 2024 | Nine Months 2023 | | :--- | :--- | :--- | :--- | :--- | | Lending | $238,928 | $203,956 | $644,585 | $597,163 | | Technology Platform | $32,955 | $32,191 | $94,848 | $64,202 | | Financial Services | $99,758 | $3,260 | $192,152 | $(25,322) | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance and condition for Q3 2024, highlighting continued growth in members and products, achievement of GAAP net income, and improved segment profitability driven by deposit funding Business Highlights - SoFi achieved its fourth consecutive quarter of net income, reporting $60.7 million for Q3 2024, a significant turnaround from a $266.7 million loss in Q3 2023[270] - Total members grew by 35% year-over-year to nearly 9.4 million, and total products increased by 31% to nearly 13.7 million as of September 30, 2024[271] - The Financial Services segment showed significant improvement, with contribution profit reaching $99.8 million in Q3 2024, compared to just $3.3 million in Q3 2023, driven by growth in member deposits and the Loan Platform Business[276] - Total deposits grew to $24.4 billion, an increase of nearly $2.4 billion during the quarter, reinforcing the company's strategy of using lower-cost deposits to fund loans[276] Key Business Metrics Key Business Metrics Growth (as of September 30) | Metric | 2024 | 2023 | % Change | | :--- | :--- | :--- | :--- | | Members | 9,372,615 | 6,957,187 | 35% | | Total Products | 13,650,730 | 10,447,806 | 31% | | - Lending segment | 1,890,761 | 1,593,906 | 19% | | - Financial Services segment | 11,759,969 | 8,853,900 | 33% | | Total Accounts — Technology Platform | 160,179,299 | 136,739,131 | 17% | Consolidated Results of Operations Consolidated Results of Operations (in thousands of USD) | Metric | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Total net revenue | $697,121 | $537,209 | 30% | | Total noninterest expense | $633,266 | $804,137 | (21)% | | Net income (loss) | $60,745 | $(266,684) | n/m | - The 21% decrease in total noninterest expense for Q3 2024 compared to Q3 2023 was primarily driven by the absence of a $247.2 million goodwill impairment charge that was recorded in the prior-year period[340] - Net interest income increased by 25% in Q3 2024 year-over-year, driven by higher interest income from growth in personal and student loan balances and lower interest expense on warehouse facilities due to a funding mix shift towards deposits[327][328] Summary Results by Segment Lending Segment Origination Volume (in thousands of USD) | Loan Type | Q3 2024 | Q3 2023 | % Change | | :--- | :--- | :--- | :--- | | Personal loans | $4,892,040 | $3,885,967 | 26% | | Student loans | $943,584 | $919,330 | 3% | | Home loans | $489,767 | $355,698 | 38% | | Total | $6,325,391 | $5,160,995 | 23% | - The Lending segment's contribution profit grew 17% year-over-year to $238.9 million in Q3 2024, with total net revenue increasing 14% to $396.2 million[368] - The Technology Platform segment's contribution profit was $33.0 million in Q3 2024, a 2% increase from Q3 2023, on total net revenue of $102.5 million, which grew 14% year-over-year[383] - The Financial Services segment demonstrated strong growth, with total net revenue increasing 102% to $238.3 million and contribution profit surging to $99.8 million in Q3 2024 from $3.3 million in Q3 2023[389] Liquidity and Capital Resources Total Liquidity Reserves (in thousands of USD, as of September 30, 2024) | Source | Amount Available | Remaining Available Capacity | | :--- | :--- | :--- | | Cash and cash equivalents | $2,354,965 | $2,354,965 | | Investments in AFS debt securities | $1,318,330 | $1,318,330 | | Warehouse facilities | $7,530,000 | $6,197,360 | | Revolving credit facility | $645,000 | $146,700 | | Total Liquidity | $12,083,889 | $10,227,749 | - Primary funding sources include SoFi Bank deposits, warehouse funding, common equity, and convertible debt, with approximately 98% of the company's total deposits insured as of September 30, 2024[404][405] - As of September 30, 2024, both SoFi Technologies and SoFi Bank exceeded regulatory capital ratios to be considered 'well-capitalized', with SoFi Bank's Total risk-based capital ratio at 17.3%[417][420] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, including interest rate and credit risk, indicating a liability-sensitive balance sheet and potential impacts from credit loss rate changes Net Interest Income Sensitivity to Interest Rate Changes (in thousands of USD) | Basis Point Change | Impact on NII (as of Sep 30, 2024) | | :--- | :--- | | +200 | $(117,117) | | +100 | $(53,195) | | -100 | $44,479 | | -200 | $83,231 | Fair Value Sensitivity of Financial Assets to Interest Rate Changes (in thousands of USD) | Basis Point Change | Impact on Fair Value (as of Sep 30, 2024) | | :--- | :--- | | +200 | $(1,003,553) | | +100 | $(512,946) | | -100 | $540,363 | | -200 | $1,104,443 | - The company's balance sheet is liability-sensitive, meaning liabilities are expected to reprice faster than assets, resulting in higher net interest income in a decreasing interest rate environment[461] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2024, with no material changes in internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[474] - No changes in internal control over financial reporting occurred during the quarter ended September 30, 2024, that have materially affected, or are reasonably likely to materially affect, internal controls[475] PART II – OTHER INFORMATION Item 1A. Risk Factors This section outlines numerous business, financial, operational, strategic, credit, funding, regulatory, personnel, risk management, information technology, and securities ownership risks facing the company - Key business risks include intense competition, reliance on a successful business model for continued profitability, and extensive legislative and regulatory policies, particularly due to its status as a bank holding company[481] - The company is exposed to macroeconomic factors like inflation and interest rate fluctuations, which can impact consumer demand, delinquency rates, and funding costs[481] - Operational risks include the potential loss of significant loan purchasers or technology platform clients, failure of third-party service providers, and cybersecurity breaches[481][487] Item 5. Other Information This section reports no Rule 10b5-1 trading arrangement changes and discloses the resignations of two directors effective November 7, 2024, for professional reasons - On November 7, 2024, directors Ahmed Al-Hammadi and Harvey Schwartz resigned from the Board of Directors to focus on other professional commitments, with their resignations not due to any disagreement with the company[813]